Zabetti A. Pappas - Page 22

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          not conduct sufficient business activities to be recognized for             
          Federal income tax purposes.                                                
               Petitioner’s activities with respect to Real Services reveal           
          many characteristics of an alter ego, such as:                              
               “the intermingling of corporate and personal funds,                    
               undercapitalization of the corporation, failure to                     
               observe corporate formalities such as the maintenance                  
               of separate books and records, failure to pay                          
               dividends, insolvency at the time of a transaction,                    
               siphoning off of funds by the dominant shareholder, and                
               the inactivity of other officers and directors.”                       
               [LiButti v. United States, 107 F.3d 110, 119 (2d Cir.                  
               1997) (quoting Bridgestone/Firestone, Inc. v. Recovery                 
               Credit Servs., Inc., 98 F.3d 13, 18 (2d Cir. 1996)).]                  
               Petitioner observed no meaningful distinction between her              
          personal funds and those of her corporation.  Although petitioner           
          opened bank accounts in the name of Real Services, she siphoned             
          funds from that account for personal expenses and gifts.  On the            
          other hand, petitioner wrote checks in her own name for                     
          transactions that she now alleges were those of Real Services.              
          The record also reveals a number of checks made out to Real                 
          Services from petitioner’s escort service clients, but the                  
          evidence suggests that, in naming the payee, the clientele were             
          only following petitioner’s wishes.                                         
               There is no indication that Real Services was ever properly            
          capitalized; to the contrary, it often appeared to be insolvent.            
          Individuals such as John K. and Tammy M., who had made loans to             
          petitioner operating as Real Services, reported that checks they            
          received in repayment often were dishonored.                                

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