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income doctrine. It is still possible that a taxpayer could
assign the receipt of income earned to a viable corporation in an
attempt to avoid the tax liability for that income. This would
violate the general principle that income is taxable to the
person who earns it. See United States v. Basye, supra at
449-450; Helvering v. Horst, 311 U.S. 112, 119 (1940); Lucas v.
Earl, supra at 114-115. Additionally, section 482 authorizes the
Secretary to apportion or allocate income between organizations
controlled by the same interests if he determines that such
distribution, apportionment, or allocation is necessary in order
to prevent evasion of taxes or clearly to reflect the income of
any such organizations.
1. Sham Corporations
Respondent asserts that IRA, its subsidiaries Carlco, TMT,
and BWK, Inc., and Holding Co. were sham or dummy corporations
that should not be recognized as separate taxable entities. We
agree.
Although taxpayers have the right to mold their business
transactions in such a manner as to minimize the incidence of
taxation, United States v. Cumberland Pub. Serv. Co., 338 U.S.
451 (1950), the Government is not required to acquiesce in the
form chosen by taxpayers for doing business. If the form is
unreal and a sham, the fiction may be disregarded for purposes of
the tax statutes. See Higgins v. Smith, supra; Gregory v.
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