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Petitioner did not change any activity with respect to the
crop hail insurance business, formally or informally, after he
allegedly transferred the business to Taxman and WFIC, except
that he deposited the income from the business, including the
sale proceeds, into WFIC’s bank account. Petitioner’s deposits
of insurance income into WFIC’s bank accounts, in the absence of
any other proof that WFIC held the insurance business, do not
prove that a transfer occurred. Petitioner alleges that he
reported insurance commissions on Taxman’s and WFIC’s corporate
returns, but he has not presented itemized lists of income for
the corporations. In addition, petitioner’s failure to inform
his insurance customers that he was acting on behalf of a
corporation is a factor indicating that State law may not have
afforded petitioner corporate liability protection. See
Hilzendager v. Skwarok, 335 N.W.2d 768, 774 (N.D. 1983).8
Petitioner also argues that he should not be required to
include the crop hail insurance sale proceeds in his personal
income because an IRS audit of his 1987 individual return
required him to remove certain deductions from his individual
8The parties stipulated that North Dakota law did not allow
corporations to hold insurance licenses until 1995. Our analysis
of North Dakota insurance law, however, revealed no such
limitation. In any case, we do not consider this factor to be
relevant to our determination. Cf. Jones v. Commissioner, 64
T.C. 1066 (1975) (holding that a court reporter’s assignment of
income to her personal service corporation was invalid because
State law did not allow corporations to perform court reporter
services).
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