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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.
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