- 43 -
imposing the fraud penalty under section 6663. Clayton v.
Commissioner, 102 T.C. 632, 653 (1994).
A corporation can act only through its officers and does not
escape responsibility for acts of its officers performed in that
capacity. DiLeo v. Commissioner, 96 T.C. at 875. It follows
that corporate fraud necessarily depends upon the fraudulent
intent of the corporate officers. Id. In determining whether
SCC acted with the requisite fraudulent intent, we must consider
the actions of Mr. Strong, SCC’s president and sole shareholder.
The pertinent questions are: (1) Whether Mr. Strong had
sufficient control of the corporation that his fraudulent acts
should be imputed to the corporation and (2) whether Mr. Strong
was acting on behalf of, and not against the interests of, SCC.
See Ruidoso Racing Association, Inc. v. Commissioner, 476 F.2d
502, 506 (10th Cir. 1973), affg. in part and remanding in part on
another ground T.C. Memo. 1971-194; Botwinik Bros., Inc. v.
Commissioner, 39 T.C. 988, 996 (1963); Federbush v. Commissioner,
34 T.C. 740, 750 (1960), affd. per curiam 325 F.2d 1 (2d Cir.
1963); Moore v. Commissioner, T.C. Memo. 1977-275, affd. 619 F.2d
619 (6th Cir. 1980).
Mr. Strong was the sole shareholder, officer, and director
of SCC and had control over its activities. He diverted proceeds
for his own use that belonged to SCC. Given Mr. Strong’s limited
education, lack of tax experience, and existence as SCC’s only
Page: Previous 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 NextLast modified: May 25, 2011