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October 22, 2008 - Phil Hodgen

Tax Court judge ignoring Panamanian corporation

In response to an email I just got from Denis Carrade, here’s another resource.

Denis, you remember we talked in the class yesterday about the interesting situation of having a corporation, and the corporation’s assets are being used by the shareholder for personal purposes. I can hear the brain klaxons firing up now, just thinking about that.

I mentioned that I had remembered some Tax Court case somewhere involving an alien ownership of a house inside a corporation and how the Tax Court judge casually addressed this situation while breezing by on the way to resolving another issue.

After some brainstorming on Lexis, I found the case. It is Bigio v. Commissioner and my memory was correct. The comment by the judge is not on the issue of the case. The issue the judge was addressing was the “Resident?? Yes or no?” one.

If you look at Footnote 2, I have highlighted the relevant sentence. The taxpayer owned a property inside a Panamanian corporation and the judge cavalierly marches past it to attribute beneficial ownership to the taxpayer. The language is mushy, the implications tenuous, etc.

But this is the only case I can think of off the top of my head involving a nonresident alien and a house inside a corporation.

Using the appropriate lolcatz eyerolling, I’d say this is Dicta! in a Footnote!? Translation to English — this case doesn’t answer any questions for us.

Foreign Business Activities in the USA US Real Estate Investments