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Higgins v. Smith, 308 U.S. 473, 477 (1940). A taxpayer is not free
to "turn around and disclaim the business form he created in order
to realize a loss as his individual loss." Sangers Home for
Chronic Patients, Inc. v. Commissioner, 72 T.C. 105, 116 (1979);
see also Barker v. Commissioner, T.C. Memo. 1993-280. An exception
to these rules exists where the corporate form is a sham or unreal.
Higgins v. Smith, supra at 477-478.
Whether a corporation is formed or not is a matter of State
law; however, whether the corporate entity (if found to exist)
should be disregarded for Federal taxation purposes is a matter of
Federal law. Stoody v. Commissioner, 66 T.C. 710, 716-717 (1976).
Under New Mexico law: (1) The filing of the articles of
incorporation is conclusive evidence that all conditions precedent
to the existence of a corporation have been satisfied. N.M. Stat.
Ann. sec. 53-12-4 (Michie 1978); (2) A corporation that has
commenced business activity may dissolve voluntarily by written
consent of the shareholders or by an act of the corporation. Id.
at secs. 53-16-2 and 3; (3) Following the decision to dissolve the
corporation, a statement of intent to dissolve must be filed with
the State. Id. at sec. 53-16-4; and (4) Upon the filing of the
statement of intent to dissolve, the corporation must cease to
carry on its business; however, its corporate existence continues
to exist until a certificate of dissolution has been issued by the
State. Id. at sec. 53-16-5.
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