- 10 -
with that charged for similar parcels of real estate in the same
locale. Additionally, petitioner intended that the duration of
the lease extend well beyond the month-to-month term indicated in
the document. Thus, as in Bardes, the expenditures incurred by
petitioner's corporation were in fact made pursuant to bona fide
business transactions between petitioner and Goshorn. Conse-
quently, we hold that petitioner did not realize dividend income
as a result of Goshorn's expenditures for leasehold improvements.
Loans
A distribution by a corporation to a shareholder constitutes
a loan, rather than a constructive dividend, if, at the time of
its disbursement, the parties intended that the shareholder repay
the loan. Crowley v. Commissioner, 962 F.2d 1077, 1079 (1st Cir.
1992), affg. T.C. Memo. 1990-636; Wiese v. Commissioner, 93 F.2d
921 (8th Cir. 1938), affg. 35 B.T.A. 701 (1937); Miele v. Commis-
sioner, 56 T.C. 556, 567 (1971), affd. without published opinion,
474 F.2d 1338 (3d Cir. 1973). The issue of whether a transfer by
a corporation to a shareholder constitutes a loan or a
constructive dividend is a factual issue, which "depends pri-
marily upon the good-faith intention of the shareholder to repay
the amounts received and the intention of the corporation to
require repayment." J.A. Tobin Constr. Co. v. Commissioner, 85
T.C. 1005, 1022 (1985). Transfers to a shareholder of a closely
held corporation require special scrutiny because of the
unfettered control exercised by that shareholder. Id. Peti-
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 Next
Last modified: May 25, 2011