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Because petitioner has failed to prove error in respondent's
determination, we need not address respondent's alternative
position that the payments represented wages to petitioner. We
note, however, petitioner's argument:
There is no dispute that Gibbon's payments were unique
among the employees and stockholders of the
Corporation. The distinction is that unlike the other
employees and stockholders, Gibbons was the only one to
loan the Corporation substantial sums of money, to
advance on behalf of the Corporation funds for its
business expenses and to provide the Corporation with
the use of his depreciable equipment for the
Corporation's business uses. The unique payments were
in recognition and partial satisfaction of these unique
activities on its behalf.
Inasmuch as petitioner was not paid any salary during 1988 or
1989, petitioner's argument suggests that he was compensated by
the payments in dispute. The tax consequences to petitioner
would be the same. Allied has not timely argued that it would be
entitled to deduct the payments as compensation. Respondent's
determination that petitioner received constructive dividends in
the amounts of $40,859 and $31,608 for 1988 and 1989,
respectively, will be sustained.
Sections 121 and 1034
Respondent determined that petitioner is not entitled to
exclude or to defer any gain from the sale of the Solomons house.
Petitioner contends that he is entitled to exclude $125,000 of
gain under section 121 and to rollover $89,667 of gain under
section 1034.
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