Opinion ID: 357068
Heading Depth: 2
Heading Rank: 3

Heading: the corporation's fraud:

Text: 201 A final matter, raised by the Government's cross-appeal, concerns the failure of the district court to find the Corporation liable for fraud. As noted above, we are unable to discern the reason behind the district court's decision to distinguish between Loftin and the Corporation on the issue of fraud. While Loftin's actions as President of the Corporation and its majority stockholder are, at best, tangentially available as foundations for Loftin's fraud as an individual taxpayer, they are quite relevant to the issue of the Corporation's fraud. 202 Loftin & Woodard, Inc. was controlled completely by Loftin and Woodard. They were the sole shareholders. In addition, they were the sole executive employees president and vice-president respectively. 203 In investigating the issue of corporate fraud, the court must determine whether the conduct and intentions of the corporation's officers and/ or agents may be imputed to the entity itself. Hicks Co. v. Commissioner, 56 T.C. 982 (1971), aff'd 470 F.2d 87 (1st Cir. 1972); Benes, supra. It is difficult to perceive how the actions of Loftin and Woodard could not have been attributable to the corporate entity in almost every instance. If Loftin and/or Woodard were fraudulently culpable for their actions with respect to the cash advances etc., it would be difficult to justify the district court's failure to impute the same motive to the Corporation. The Corporation benefitted from the expenses it paid on behalf of Loftin and Woodard in that those expenses were translated into deductions each year. More to the point, the very manner in which the Corporation was conducted by Loftin and Woodard suggests that the corporate entity had become their alter ego a fact in itself capable of providing a sufficient basis for the imputation of fraud. See, Ruidoso,supra. 77 Indeed, 204 (w)here fraud is alleged against a corporate taxpayer, the requisite proof of fraudulent intent is to be found in the acts of its officers, inasmuch as the corporation, being an artificial person created by law, can have no separate intent of its own apart from those who direct its affairs. 205 Benes, 42 T.C. at 382. 206 Thus, should the district court find Loftin liable for fraud on remand, it should reconsider the issue of corporate fraud in connection with those fraudulent elements of the deficiency which benefitted the Corporation in some fashion. 78