Commissioner v. Bollinger

Holding

A corporation can be disregarded as the owner's true agent for federal tax purposes when the relationship is genuine in both form and substance rather than a dressed-up ownership arrangement.

Facts

Kentucky lenders required apartment-project borrowers to use a corporation as the record titleholder and nominal debtor because of state usury rules. The partnerships and the corporation documented that the corporation would hold title solely as nominee and agent while the partnerships remained the real owners.

Reasoning

The Court accepted the agency arrangement because the written nominee relationship existed from the start, the corporation acted only on the partnerships' behalf, and the surrounding facts showed real agency rather than a tax-motivated attempt to hide ownership. It rejected the Commissioner's view that a separate agency fee or strict arm's-length dealing was always required.