Seattle Hardware Company v. Clark Squire, Collector of Internal Revenue

We think the trial court correctly disposed of this matter. Appellant argues earnestly that the decision is at variance with National Carbide Corp. v. Commissioner, 336 U.S. 422 , 69 S.Ct. 726 , but a study of the latter opinion persuades us that the situation it dealt with is easily distinguishable. In the National Carbide case the subsidiary corporation utilized were major operating and manufacturing companies set up on a permanent basis. The court stressed their huge individual earnings and the great numbers of their employees as evidence that they were not functioning as mere agents of the principal corporation. Obviously they had a flesh and blood existence, whereas the corporation utilized in the present instance had little if anything more than a transient paper existence during which it served as a nominal conduit for the passage of title to the property from the taxpayer’s agent to the taxpayer itself. It had no stock book or other records of its own, and so haphazard were the essays looking toward its organization that even its purported organizational meeting was held some days in advance of its actual incorporation.

For the reasons given more in detail below, D.C., 83…