Frank J. & Ann M. Feraco - Page 12




                                       - 12 -                                         

               To determine whether a taxpayer is a shareholder of a                  
          corporation for Federal income tax purposes, courts look to                 
          beneficial ownership, and not merely to legal title.  Pahl v.               
          Commissioner, T.C. Memo. 1996-176, affd. 150 F.3d 1124 (9th Cir.            
          1998).  Because courts cannot successfully conjecture as to the             
          subjective intent of the parties when determining who had                   
          beneficial ownership, the courts must rely on the objective                 
          evidence of intent provided by the parties' overt acts.  Pacific            
          Coast Music Jobbers, Inc. v. Commissioner, 55 T.C. 866, 874                 
          (1971), affd. 457 F.2d 1165 (5th Cir. 1972).  A taxpayer can own            
          an interest in a corporation without holding any physical                   
          evidence thereof.  Richardson v. Shaw, 209 U.S. 365 (1908);                 
          Bonsall v. Commissioner, 317 F.2d 61, 63 (2d Cir. 1963), affg.              
          T.C. Memo. 1962-151.                                                        
               Based on the facts of these cases, we find that Bob had                
          beneficial ownership in and was a shareholder of Southern Auto.             
          The August 24, 1993, Minutes of Southern Auto state that "It was            
          also agreed to issue 10 shares of common stock at a par value of            
          $.001 per share to Bob Butler effective September 1, 1993."                 
          Contrary to petitioners' argument, the agreement was not an                 
          option to purchase stock in the future.  The stock was to be                
          issued on September 1, 1993.  Bob also agreed to "loan over time,           
          $25,000 interest free to the business."  However, the "loan" of             
          $25,000 was not a precondition before Bob became a shareholder.             





Page:  Previous  2  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20  21  Next

Last modified: May 25, 2011