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2. Cash Distributions to Mr. Cordes
ECI distributed $600,000 to Mr. Cordes in 1995. Petitioners
contend that this amount does not represent constructive
dividends, but instead it represents loans or repayments of loans
by ECI to Mr. Cordes. Petitioners have offered no evidence that
any loans existed between ECI and Mr. Cordes. Without support,
petitioners assert that the “multi-year history of large loans by
and to Mr. Cordes and these corporations over the years” and the
“consistent history of repayment of the loans” supports their
position. These statements are insufficient to show that the
economic nature of the transactions themselves is that of a debt
rather than of a constructive dividend. Cordes v. Commissioner,
T.C. Memo. 1994-377 (citing Williams v. Commissioner, 627 F.2d
1032, 1034 (10th Cir. 1980), affg. T.C. Memo. 1978-306; Alterman
Foods, Inc. v. United States, 505 F.2d 873, 876-877 (5th Cir.
1974)).
We cannot find that these payments represent loans or
repayments of loans; petitioners have failed to meet their burden
of proof. Furthermore, because petitioners have not shown that
Mr. Cordes did not benefit or that ECI did benefit from these
payments, we conclude these payments are constructive dividends
to ECI’s beneficial owner and sole shareholder for Federal income
tax purposes, Mr. Cordes.
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