Investment Research Associates - Page 185




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         Helvering, supra.  The question whether a corporation is genuine              
         or a sham is one of fact.  See Noonan v. Commissioner, 451 F.2d               
         992, 993 (9th Cir. 1971), Shaw Constr. Co. v. Commissioner, 323               
         F.2d 316, 321 (9th Cir. 1963).                                                
              In Moline Properties, Inc. v. Commissioner, supra at 438-                
         439, the Supreme Court established the following test for                     
         determining whether a corporation will be recognized as a                     
         separate taxable entity:                                                      
                   The doctrine of "corporate entity" fills a useful                   
              purpose in business life.  Whether the purpose be to                     
              gain an advantage under the law of the state of                          
              incorporation or to avoid, or to comply with the                         
              demands of creditors or to serve the creator's personal                  
              or undisclosed convenience so long as that purpose is                    
              the equivalent of business activity or is followed by                    
              the carrying on of business by the corporation, the                      
              corporation remains a "separate taxable entity".  *  *                   
              *  [Fn. refs. omitted.]                                                  
         Thus, if the corporations were organized for substantial business             
         purposes, or actually engaged in substantial business activities,             
         their corporate forms must be recognized for tax purposes.                    
              To be recognized, a corporation must be organized for a                  
         substantial "business" purpose in the ordinary meaning.  See                  
         National Investors Corp. v. Hoey, 144 F.2d 466, 468 (2d Cir.                  
         1944).  "[E]scaping taxation is not 'business' in the ordinary                
         meaning".  Id.  Thus, a corporation organized for the purpose of              
         avoiding tax is not organized for substantial business purposes.              
              It is clear from the evidence in these cases that the                    
         multiple corporations, as well as the trusts and partnerships,                





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