- 19 - details: (1) His filing status on that return was married filing separate; (2) he claimed exemptions for his three children; (3) he reported adjusted gross income of $8,867; (4) he claimed itemized deductions of $4,127; and (5) taxable income of zero. The reported self-employment tax liability of $1,153 was not paid until April 1992. Mr. Strong did not file a Federal income tax return for 1989. Respondent’s Income Determinations Respondent determined in the notice of deficiency that SCC was a taxable corporate entity and determined SCC’s net taxable income in the years 1990-94. These determinations are disputed as to the status of SCC as a taxpayer, the gross income, and the allowable expenses. Respondent also determined in a separate notice of deficiency that Mr. Strong received constructive dividend income in the full amount of SCC’s net income. Both SCC and Mr. Strong timely filed petitions with this Court. OPINION I. Is SCC A Taxable Entity? SCC and Mr. Strong argue that SCC should be ignored for tax purposes and was not a separate taxable entity apart from Mr. Strong. A corporation is a separate taxable entity if it was formed for a business purpose and engaged in business activity. See Moline Props., Inc. v. Commissioner, 319 U.S. 436, 439 (1943); Strong v. Commissioner, 66 T.C. 12, 23-24 (1976), affd.Page: Previous 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Next
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