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within his possession and which, if true, would be favorable to
him, gives rise to the presumption that if produced it would be
unfavorable.” Wichita Terminal Elevator Co. v. Commissioner, 6
T.C. at 1165. Under Wichita Terminal, the assumption must be
that the incorporation documents would contradict Ms. Felton’s
testimony.
Balanced against Ms. Felton’s unsupported assertions, see
Tokarski v. Commissioner, 87 T.C. at 77, are the facts in this
case establishing that Ms. Felton is the corporate petitioner’s
sole shareholder. She is the sole attorney performing all of the
petitioner law firm’s legal services. Ms. Felton is also
presumed to be the sole officer and/or director of the
corporation.8 It is the opinion of the Court that Ms. Felton is
petitioner’s employee for the purpose of the instant analysis.
Therefore, because all of petitioner’s stock was held
directly by its employee, Ms. Felton, petitioner also satisfied
8 “When all of the issued and outstanding stock of the
corporation is owned by one person, such person may hold all or
any combination of offices.” N.Y. Bus. Corp. Law sec. 715
(McKinney 2006). Aside from Ms. Felton’s being listed with the
New York Secretary of State as petitioner’s chairman or chief
executive officer, New York State law requires that all officers
and directors of a professional service corporation be authorized
to engage in the practice of the profession “which such
corporation is authorized to practice” and is either a
shareholder or “engaged in the practice of his profession in such
corporation.” N.Y. Bus. Corp. Law sec. 1508 (McKinney 2006).
Ms. Felton is petitioner’s sole shareholder, and she testified
that she is the only attorney who performed legal services for
petitioner. None of the clerical or secretarial staff employed
by petitioner is authorized under New York State law to be an
officer or director of the corporation.
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