Dale H. Sundby and Edith Littlefield Sundby - Page 9

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          taxpayer is involved in the activity with continuity and                    
          regularity and with the primary purpose of making a profit.                 
          Commissioner v. Groetzinger, 480 U.S. 23, 35 (1987).  However,              
          the trade or business of a taxpayer is separate and distinct from           
          the trade or business of a corporation owned by that taxpayer.              
          Moline Props., Inc. v. Commissioner, 319 U.S. 436 (1943).  The              
          Supreme Court has stated:                                                   
                    The doctrine of corporate entity fills a useful purpose           
               in business life.  Whether the purpose be to gain an                   
               advantage under the law of the state of incorporation or to            
               avoid or to comply with the demands of creditors or to serve           
               the creator’s personal or undisclosed convenience, so long             
               as that purpose is the equivalent of business activity or is           
               followed by the carrying on of business by the corporation,            
               the corporation remains a separate taxable entity.  * * *              
               [Id. at 438-439; fn. refs. omitted.]                                   
          Because the corporation is a separate taxable entity, the                   
          expenses paid or incurred in carrying on the trade or business of           
          the corporation are deductible by the corporation rather than by            
          its shareholders.  Sec. 162(a); Moline Props., Inc. v.                      
          Commissioner, supra; Deputy v. du Pont, 308 U.S. 488, 494 (1940);           
          Weigman v. Commissioner, 47 T.C. 596 (1967), affd. per curiam 400           
          F.2d 584 (9th Cir. 1968).  This is so even where the shareholders           
          personally pay the ordinary and necessary expenses of the                   
          corporation’s trade or business.  Deputy v. du Pont, supra; Rand            
          v. Commissioner, 35 T.C. 956 (1961).  In certain circumstances,             
          the corporate form may be disregarded where it is “a sham or                
          unreal”.  Moline Props., Inc. v. Commissioner, supra at 439.                

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