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the tax disadvantages. Higgins v. Smith, 308 U.S. 473, 477
(1940); see also Moline Props., Inc. v. Commissioner, supra. A
corporation and its stockholders are separate entities, and the
title to corporate property is vested in the corporation and not
in the owners of the corporate stock. Sun Towers, Inc. v.
Heckler, 725 F.2d. 315, 331 (5th Cir. 1984) (citing Moline
Props., Inc. v. Commissioner, supra). Petitioners have made no
claim in this proceeding that the separate legal status of their
corporations should be disregarded.
In Vaughan v. Commissioner, 17 B.T.A. 620 (1929), the Board
of Tax Appeals refused to disregard the separate entity and
disallowed a corporate loss claimed by a stockholder on his own
return. The assistant cashier of a bank embezzled large amounts
from the bank. In order to keep the bank open, the taxpayer,
president of the bank and a large stockholder, had to give the
bank securities worth $63,336 within 24 hours. The Board held
the taxpayer could not deduct the contribution of $63,336 as a
loss, since the bank had suffered the loss, and the bank’s loss
was not the stockholder’s loss.
Petitioners’ corporations are entities separate from
petitioners and their sole proprietorship, SWAS.8 The separate
8With respect to entities solely owned by husband and wife
as community property under the laws of a State, the IRS will
respect a taxpayer’s treatment of the entity as either a
partnership or a disregarded entity. Rev. Proc. 2002-69, 2002-45
(continued...)
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