Real estate partnerships in which Bollinger was a partner acquired and developed income-producing properties. To secure financing, the lenders required that legal title be placed in a corporation rather than directly in the partnerships. In response, the partnerships formed single-purpose corporations whose sole function was to hold legal title to the properties and to execute loan and security documents. Contemporaneously with the acquisitions, the partnerships and the corporations executed written agency/nominee agreements stating that the corporations would act exclusively as agents for the partnerships with respect to the properties. The partnerships, not the corporations, bore all benefits and burdens of ownership: they made investment and management decisions, collected rents, paid expenses, and reported all income, deductions (including depreciation and interest), and losses on their tax returns. The title-holding corporations had no employees, no independent business, and received only nominal fees for their services; they were consistently represented to lenders, tenants, and other third parties as acting solely on behalf of the partnerships. The Commissioner asserted that, under the general rule recognizing corporations as separate taxpayers, the properties and associated tax attributes should be attributed to the corporations, thereby disallowing the partnerships' claimed deductions. The Tax Court and the court of appeals ruled for the taxpayers, and the Supreme Court granted certiorari.
Whether a corporation that holds title to property pursuant to a genuine agency/nominee arrangement may be disregarded for federal tax purposes so that the income, deductions, and losses attributable to the property are taxed to the principal (here, the partnerships) rather than to the corporation.
A corporation is ordinarily a separate taxable entity (Moline Properties v. Commissioner), but it may be treated as a mere agent of its owners for federal tax purposes when there is a genuine, disclosed agency relationship. Under Commissioner v. Bollinger, a corporation will be disregarded as a separate taxpayer with respect to a particular asset if: (1) the fact that the corporation is acting as agent for its owners with respect to the specific property is set forth in a written agreement executed at or before the time the property is acquired; (2) the corporation functions as an agent and not as a principal with respect to the property for all purposes; and (3) the corporation is held out as the agent, and the owners as the principals, in all dealings with third parties concerning the property. National Carbide's factors inform, but do not negate, this bona fide agency exception.
Yes. The Supreme Court held that the title-holding corporations were bona fide agents/nominees of the partnerships, and thus the partnerships—not the corporations—were the owners for federal tax purposes with respect to the properties. The partnerships were entitled to the associated income, deductions, and losses.
The Court began with Moline Properties, which generally requires respect for the separate identity of a corporation for tax purposes. However, Moline itself recognized that a corporation may be an agent of its owners. National Carbide, decided after Moline, identified factors for determining whether a subsidiary is an agent of its parent, but did not foreclose treatment of a corporation as a genuine agent in appropriate circumstances. The Commissioner urged a rigid application of National Carbide's factors to deny agency status, effectively foreclosing agency when the corporation is closely held by the principal. The Court rejected this view, emphasizing substance over form and the long-recognized possibility that corporations may act as true agents. What matters is whether there is a real and disclosed agency, not a post hoc label. The Court articulated a practical test: there must be a contemporaneous written agency agreement establishing that the corporation is acting for the principal with respect to the specific property; the corporation must actually function as an agent and not a principal in all respects (i.e., it should not bear the benefits and burdens of ownership or conduct independent business); and the parties must hold out the corporation as an agent in all dealings with third parties. These requirements prevent after-the-fact recharacterizations and ensure transparency. Applying this test, the Court found that the corporations were mere title-holding agents: they were formed solely because lenders required title to be in a corporation; written agency agreements were executed at the time of acquisition; the partnerships controlled and bore all economic incidents of ownership; and third parties—including lenders and other counterparties—were apprised that the corporations acted as agents. The corporations had no independent business activity and received only nominal fees. These facts satisfied the agency requirements, and the tax attributes properly belonged to the partnerships. The Court thus affirmed the lower courts' decisions recognizing the partnerships as the taxpayers with respect to the properties.
Bollinger creates a clear, administrable safe harbor for disregarding a corporation that serves solely as a title-holding agent. It reconciles Moline Properties' respect for corporate form with the reality that lenders or regulators may require title to be held in a corporation even when the economic owner is a partnership. For students and practitioners, the case is central to understanding nominee/agency structures, preventing inadvertent entity-level taxation, and structuring real estate and financing transactions. It underscores that documentation, consistent conduct, and third-party disclosure are critical to ensure the intended tax treatment.
Commissioner v. Bollinger underscores that substance and transparency govern tax characterization when a corporation holds title purely as a ministerial accommodation to lenders or regulators. Where parties contemporaneously document agency, operate consistently with that arrangement, and disclose it to third parties, the tax law will attribute ownership to the true economic principal despite the interposition of a corporate titleholder.{" "}