"When an entity is without economic substance, it may be deemed to be the 'alter ego' of the taxpayer. Federal courts generally look to state law to determine whether an entity is a taxpayer's alter ego. The voting trusts giving him control of the company were revoked April 1, 2002, returning control to the employee-owners. Although David lived in Switzerland, he monitored the status of the business by telephone.īaum-Delaware made monthly payments on the $550,000 note from January 2001 to August 2002 to a Swiss account entitled "Baum Hydraulics Nebraska." After August 2002 Baum Delaware applied the note payments against a receivable David Allen owed Baum-Delaware for various expenses he incurred paid for by that entity.ĭavid Allen resigned from Baum-Delaware on March 26, 2002. Immediately following the sale, at David Allen's request, the employee-owners issued voting trusts in his favor giving him voting rights with respect to their shares. Baum-Nebraska sold its assets to Baum-Delaware in exchange for a $550,000 promissory note.
In February 2000 David Allen incorporated a new business, Baum-Delaware the long-time employees of Baum Nebraska became its shareholders. Baum-Nebraska also paid certain of Allen's credit card bills and business expenses, some of which the IRS asserted were personal in nature. Baum-Nebraska paid Hydraulics Baum approximately $1.2 million from 1993 to 2001 for Allen's overseas efforts. At David Allen's request, Baum-Nebraska made monthly payments by wire transfer from its business bank account to Hydraulics Baum's Swiss account, which Allen controlled. David Allen provided consulting services to Hydraulics Baum and to Baum-Nebraska through Hydraulics Baum.Ĭompensation from Baum-Nebraska was Hydraulics Baum's only source of revenue. Hydraulics Baum entered into an agreement with Baum-Nebraska to provide all of the services required to help establish Baum-Nebraska's presence in Europe. David Allen, who moved to Switzerland in the early 1990s, served as the company's president, chairman and general manager. was incorporated in Switzerland in 1988 and maintained its business office there. Since 1977 David Allen had controlled the corporation as either its sole shareholder or through proxy agreements giving him control of all of the corporation's voting shares.
Alter ego free onlinw full#
The IRS was unable to satisfy the full personal tax assessment against David and filed a lien against Bantu Nebraska citing the corporation as David's nominee or alter ego.īaum-Nebraska sold precision machinery components. He was the fiduciary and transferee of his father's estate, but failed to pay estate and estate income taxes relating to his father's assets.
The examination resulted in personal tax assessments of approximately $26 million against Allen's son, David. In May 1991 the IRS began to examine the estate of Sloan Allen, who died in 1987.
Taxpayers are allowed to reduce their tax burden by any lawful means, but may not "construct paper entities to avoid taxation when those entities are without economic substance." shall be a lien in favor of the United States upon all property and rights to property, whether real or personal, belonging to such person." The broad language of the statute shows Congress meant to reach every property interest a taxpayer has, allowing the government to collect tax debts from the assets of a taxpayer's nominee, instrumentality or alter ego.
Alter ego free onlinw code#
code provides: If any person liable to pay any tax neglects or refuses to pay the same after demand, the amount.