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Racing Equip., Inc. v. Commissioner, T.C. Memo. 1987-210. If
anything, Neal, the president of Simco, was more dominant than
John. Thus, John did not have sufficient control of Simco to
impute his acts to Simco on that basis, and we proceed to
consider whether John was acting in behalf of, and not against
the interests of, Simco. See Botwinik Bros. of Mass., Inc. v.
Commissioner, supra at 996.
We find that the wrongdoer, John, acted against the
interests of Simco. He diverted proceeds for his own use that
belonged to Simco. Simco did not benefit from the sales of scrap
metal, except for the incidental tax benefit resulting from the
fact that Simco did not report the income from the sales, but it
did suffer a detriment in the form of the revenue taken by John.
The diverted revenue was not money that would otherwise have been
available to him as dividends because he was a controlling or
dominant shareholder. See Alexander Shokai, Inc. v.
Commissioner, 34 F.3d 1480, 1488 (9th Cir. 1994), affg. T.C.
Memo. 1992-41; American Lithofold Corp. v. Commissioner, 55 T.C.
904, 926 (1971).
Petitioners invoke the Court of Appeals for the Third
Circuit’s opinion in Asphalt Indus., Inc. v. Commissioner, 384
F.2d 229 (3d Cir. 1967), revg. 46 T.C. 622 (1966), and invite us
to rely on what has become known as the “‘innocent stockholder’
defense”. Alexander Shokai, Inc. v. Commissioner, supra at 1489.
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