Like many things in life and the law, context is important, including, for our purposes, the defining of "alter ego" and its application to determine taxability.

To legal scholars and practicing attorneys alike, "piercing the corporate veil" is certainly not an unfamiliar concept. 

Creditors of corporate entities will, at various times, pursue the controlling shareholders to satisfy an undercapitalized corporation's indebtedness. Following along these lines, when it comes to income taxation, it is always important to be able to identify the proper taxpayer. Alter ego concepts may aid in any such determination, i.e., determining whether a corporation that presumably realizes the income should be taxed, or whether the controlling shareholder realized the income and, therefore, should bear the tax liability.