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concedes that the gain realized on the 1986 condemnation award
should have been reported on an amended 1986 return.
3. Magnum Development Corp.
During the 1986 and 1987 taxable years, Magnum was a
closely held real estate development corporation owned by Mr.
Acquaviva and three of his sons. Magnum functioned as the
general contractor on Mr. Acquaviva's residential real estate
development projects. Mr. Acquaviva occasionally made cash
advances to Magnum. No promissory notes were executed and Magnum
did not pay interest on the funds advanced.
Magnum paid some of Mr. Acquaviva's personal expenses.
During 1986, Magnum paid $23,890 for the installation of a
swimming pool at the Acquavivas' home and $20,000 for home
improvements. In 1987, Magnum paid $23,552 for landscaping
services benefiting the Acquavivas' home and, in addition, issued
a check in the amount of $4,400 directly to Mr. Acquaviva.
Magnum accounted for these transactions on its books as
reductions in the amount it owed Mr. Acquaviva. Magnum never
declared a dividend during 1986 or 1987. Respondent determined
that these amounts paid on behalf of or directly to Mr. Acquaviva
were dividends.
C. Tax Return Preparation
Mr. Acquaviva did not discuss tax matters with his wife.
She expected him to take care of such matters. During the years
in issue, Mr. Acquaviva or his son Christopher ensured that tax
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