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and be treated as a partnership because they lacked enough basis
to realize their full amount of flow-through loss. Before
incorporating, the taxpayers as partners had personally
guaranteed a partnership loan. The loan was not includable in
their basis in the S corporation. The taxpayers had not
transferred title in the bar and bowling alley to the
corporation; however, they caused the corporation to report
ownership of the property on its Federal income tax returns.
This Court decided that, because the S corporation had legally
incorporated under State law, filed an election to be taxed as an
S corporation, filed corporate returns, and held itself out to
the public as the owner and operator of the bowling alley, it had
sufficient business activity to establish corporate existence.
This Court also decided that, because the taxpayers incorporated
their partnership to achieve limited liability from tort, the
corporation had a substantial business purpose. See id.
We conclude that ASK Properties is indistinguishable from
the corporations in Skarda and Doe. Petitioners have stipulated
that, since its formation, ASK Properties has engaged in the
business of renting out the apartments on the Fresno property.
As in Skarda and Doe, petitioners caused ASK Properties to hold
itself out to the public as the legal entity that owns and
operates the Fresno property even though title was never formally
transferred to the corporation. In addition, petitioners caused
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