- 11 -
Inc.'s corporate status for Federal tax purposes should not be
disregarded.
Cola, Inc. was not a sham. It served an intended business
purpose. Indeed, in this regard, through Cola, Inc.'s corporate
form, Richard and Raul insulated themselves from individual
liability. See, e.g., Strong v. Commissioner, 66 T.C. 12, 25
(1976), affd. without published opinion 553 F.2d 94 (2d Cir. 1977);
Bolger v. Commissioner, 59 T.C. 760 (1973). Most notably, this was
done when Beta Maskin filed a lawsuit against Cola, Inc., and
Richard and Raul. Tellingly, in defending themselves, Richard and
Raul asserted that Cola, Inc. was "a fully capitalized California
corporation in good standing", and that they acted in their
official capacities as officers and directors of Cola, Inc. in all
dealings with Beta Maskin.
In addition to serving an intended business function, Cola,
Inc. engaged in business activities. It maintained a bank account
from which receipts and expenditures flowed. It leased property
which was the situs of the automotive crankshaft manufacturing
business. It maintained books and records. It issued invoices to
clients. It maintained a credit card. And it held itself out to
the public as a distinct corporate entity.
We are convinced that Cola, Inc. engaged in sufficient
business activities so as to render it a separate taxable entity.
In this regard, whether or not a corporation is deemed to engage in
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Next
Last modified: May 25, 2011