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one shareholder. Burnet v. Commonwealth Improvement Co., 287
U.S. 415, 420 (1932).
The Grigoracis claim that the corporation was established
for the purpose of limiting Mr. Grigoraci’s potential liability
from the partnership. According to respondent, the corporation’s
primary purpose was to allow the Grigoracis to avoid the payment
of Federal employment tax. We find no evidence in the record to
support respondent’s position and agree with the Grigoracis.
The evidence clearly establishes that the primary, if not
the sole, reason Mr. Grigoraci formed the corporation was to
limit his potential, personal liability upon entering the GTWP
partnership. Mr. Grigoraci had practiced accounting for many
years either as a general partner in other partnerships or as a
sole proprietorship. There is no evidence he had a history of
avoiding liability for employment tax. Not until he considered
joining GTWP did Mr. Grigoraci begin to use the corporate form.
Mr. Grigoraci claimed that he chose the corporate form because he
did not want to be the only partner in GTWP who was personally
liable for GTWP’s liabilities. It was Mr. Grigoraci’s
understanding that his potential future partners were both
corporations. Specifically, his partners were to be Trainer S
Corporation and Wright S Corp. Upon seeking the advice of
counsel, Mr. Grigoraci’s attorney advised him that he should use
the corporate form to limit his potential liability.
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