Moline Properties, Inc. v. Commissioner

Moline Properties (Moline) (plaintiff) was organized as a corporation by its sole stockholder, Uly O. Thompson, for the purpose of obtaining a loan for Thompson to pay back taxes on a property Thompson individually owned. As part of the organization of Moline, Thompson conveyed the property to Moline, and Moline assumed the mortgages on the property. In return, Thompson received all of Moline’s shares of stock, except for the qualifying shares. Thompson transferred the shares to a voting trustee appointed by the creditor of the loan, who held the shares as security for the loan. Thompson subsequently repaid the loan and regained control of Moline. Thompson did not dissolve Moline, and the property was still held by Moline. Moline did not own any other assets, keep books, or maintain any bank accounts. However, over the following years, Moline continued to operate by mortgaging the property, leasing and selling portions of the property, and filing tax returns, which reported sales in 1934 and 1935. Moline also sold a portion of the property in 1936, which Thompson reported on his individual tax return. Thompson subsequently sought to have the gain from the 1935 sale also reported on his individual tax return. Thompson filed a claim for a refund on Moline’s behalf for the 1935 sale. However, the Commissioner of Internal Revenue (the Commissioner) (defendant) considered the 1935 and 1936 sales as taxable to Moline. The board of tax appeals held in Moline’s favor, but the circuit court of appeals reversed and held that the corporate entity was separate from Thompson. The United States Supreme Court granted certiorari.