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boat lease transactions that subjected him to the same kind of
double taxation that is the basis for his complaint herein. On
such returns, petitioner's corporation deducted only 80 percent
of the lease payments it made to him (as required by section
274(n)), whereas petitioner reported as income on his individual
return 100 percent of the lease payments, albeit reduced by the
expense deductions associated with providing the boats. Thus, to
the extent of 20 percent of the lease payments, there was no
reduction in the passthrough income from his corporation to
offset the lease income he reported in his individual capacity as
a lessor. Apparently petitioner structured the transaction to
produce, and was willing to accept, such double inclusion of
income so long as its magnitude was exceeded by the otherwise
unallowable deductions for the costs associated with the boats
that he was able to deduct as a lessor.
We believe petitioner's argument fails to take into account
two basic principles. First, the separate existence of
corporations is firmly established under the tax law. Moline
Properties, Inc. v. Commissioner, 319 U.S. 436 (1943). Second,
the business of a corporation--including that of an S
corporation--is separate and distinct from that of its
shareholders. Deputy v. duPont, 308 U.S. 488, 494 (1940);
Durando v. United States, 70 F.3d 548, 551-552 n.9 (9th Cir.
1995); see Crook v. Commissioner, 80 T.C. 27, 32 (1983), affd.
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