Distinguishing Corporation From shareholders

1. Distinguishing Corporation From shareholders Commissioner versus Bollinger 485 U.S. 340, 108 S.Ct. 1173 TX 8020 – Summer 2007

2. The Issue • Whether a corporation holding title to a real property as an agent of the corporation’s shareholders is the owner of the property for purposes of federal income taxation

3. Facts • Partnership for developing apartments • Incorporation in order to secure a loan • Written agreement claiming the corporation as an agent of Bollinger • Income and losses reported on individual income tax returns • Losses on individual return disallowed by IRS • Court of Appeals decision challenged by IRS Commissioner • Certiorari granted by the Supreme Court

4. Citations • National Carbide Corp v.Commissioner, 336 U.S. 422 (1949) -- Corporation: relations with principal -- Six factors: standards of agency status • Moline Properties v. Commissioner 319 U.S. 436 (1943) -- Corporation: as separate tax entity

5. Reasoning:National Carbide Factors • No. 6: business purpose - carrying on normal duties of an agent. • Commissioner: Corporation is the owner, not agent • Supreme Court: Respondent represented himself as the principal to all parties concerned with the loans. • No. 5: relations not dependent on ownership • Commissioner: “Arm’s length” relationship between corporation agent and shareholder principal • Supreme Court: Such relationship should not be the only test for “agency” status.

6. Conclusion • The Supreme Court ruled in favor of Bollinger, affirming the decision of the 6th Circuit Court of Appeals. • The corporation is Bollinger’s agent which should be disregarded for tax purposes. • Bollinger is the principal and owner of property for the purpose of federal income taxation.