National Carbide Corp. v. Commissioner

Holding

A corporation formed or operated for business purposes must bear its own tax consequences, and a wholly owned subsidiary is not ignored merely because it claims to act as its parent's agent.

Facts

Air Reduction Corporation used wholly owned subsidiaries as operating companies, supplied their working capital, and required them by contract to turn over nearly all profits to the parent while the subsidiaries retained title to assets and conducted the assigned business lines.

Reasoning

The Court treated the subsidiaries as separate taxable entities because they were genuine operating corporations, not mere nominees. It emphasized that complete ownership and contractual control do not erase corporate tax status and that true agency requires more than labels placed on intercompany agreements.