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wages reported by the Grigoracis as being from Grigoraci S
Corporation would actually be income derived from providing
personal services directly to the end-user. The Grigoracis claim
that Grigoraci S Corporation is a valid entity for Federal tax
purposes and that the corporation is the partner in GTWP. We
agree with the Grigoracis.
There is no dispute that Grigoraci S Corporation was validly
organized under West Virginia law. For Federal tax purposes, a
validly organized corporation is usually respected, but it may be
disregarded in instances where it is found to be a sham. Moline
Props., Inc. v. Commissioner, 319 U.S. 436 (1943); Higgins v.
Smith, 308 U.S. 473, 477-478 (1940); Gregory v. Helvering, 293
U.S. 465 (1935). Under the test defined in Moline Properties, we
do not disregard a corporation for Federal tax purposes if it (1)
served an intended business function or purpose or (2) engaged in
business. The corporation’s existence as a taxable entity will
be recognized if it satisfies either prong of the test. Carver
v. United States, 188 Ct. Cl. 202, 412 F.2d 233, 236 (1969). The
degree of corporate business purpose or the quantum of business
activity required for recognition of the separate existence of a
corporation is rather minimal. Hosp. Corp. of Am. v.
Commissioner, 81 T.C. 520, 579-580 (1983); Strong v.
Commissioner, 66 T.C. 12, 24 (1976). A corporation is a separate
and distinct entity even if the corporation is wholly owned by
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