In the Moline Properties, Inc. v. Commissioner of Internal Revenue case in 1942, the U.S Supreme Court ruled that a corporation is considered a separate taxable entity from its shareholders and must pay taxes on its income even if it was created for a single transaction or series of transactions. The court held that once corporate organization and purpose are established, as well as activities conducted by the corporation to achieve these purposes, then such an entity should be recognized for tax purposes. This ruling came after Moline Properties attempted to avoid paying taxes on profits made from selling real estate by arguing they were not an active business but merely holding property until it could be sold off at profit.

The dissenting opinion in the Moline Properties, Inc. v. Commissioner of Internal Revenue case argued that a corporation should not be treated as an entity separate from its sole shareholder for tax purposes when it was created solely to facilitate a real estate transaction. The dissent believed that this interpretation would better align with the intent of Congress and prevent individuals from using corporations to avoid taxes unfairly. They contended that treating such corporations as separate entities allows taxpayers too much latitude in manipulating their tax liabilities, which undermines the fairness and integrity of the tax system.