Judge Battin Charles E. Wolfe was the sole shareholder and president of [the corporation,] which leased tractor-trailers. [Mr.] Wolfe also operated a business as a proprietorship . . . which was an “over-the-road” trucking business. [T]he corporation incurred a $114,472.91 federal tax bill. . . . [Mr.] Wolfe paid the taxes . . . after the Internal Revenue Service (Service) [levied against him]. The Service contends . . . the corporation was the alter ego of Mr. Wolfe, thus justifying the piercing of the corporate veil. As a general rule, a corporation is treated as a legal entity, separate and distinct from its shareholders[, who] enjoy limited liability. When the corporate entity is abused, however, the protection of limited liability may be lost. In such cases, courts may exercise their equitable powers to pierce the corporate veil. . . . The facts . . . present the classic case of a shareholder so pervasively dominating corporate affairs that the shareholder and the corporation no longer have separate identities. . . . Mr. Wolfe was the sole shareholder[,] a director and the president of the corporation. Mr. Wolfe made all the corporate decisions without consulting the other directors. The corporation did not even have a bank account. All the corporation’s banking transactions were done through the proprietorship’s bank account. . . . The corporation and the proprietorship were housed in the same office. The corporation’s employee was paid by the proprietorship. Some of the corporation’s equipment was purchased on the proprietorship’s credit. All of the corporation’s purchases were paid for on a proprietorship bank account. When the corporation received payment from third parties, the money was deposited into the proprietorship’s bank account. Even Mr. Wolfe could not distinguish between the corporation and the proprietorship. . . . It is clear that the corporation and the proprietorship were operated as a single instrumentality under the sole control of Mr. Wolfe. Therefore, it was proper for the Service to look to Wolfe’s personal assets to satisfy the taxes of his alter ego corporation. [Held for the Internal Revenue Service.] Questions 1. Who owed the taxes? 2. How was the corporate form misused? 3. What injustice would have resulted if Wolfe had not been required to pay?
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