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result of petitioners' use in 1983 of the profits of CCMI for
personal purposes (namely, to purchase and improve the Oyster
Pond Property), and respondent determined that, as a result of
petitioners' alleged fraudulent failure to report such
distributions on their 1983 joint Federal income tax return, the
period of limitations on assessment was still open.
OPINION
1983 Constructive Dividends
Numerous court opinions establish that if shareholders of a
corporation receive distributions of corporate funds or other
corporate property for their personal use or benefit, the
distributions from the corporation may be taxed to the
shareholders as constructive dividends to the extent of the
corporation's earnings and profits. Ireland v. United States,
621 F.2d 731, 735 (5th Cir. 1980); Loftin & Woodard, Inc. v.
United States, 577 F.2d 1206, 1214 (5th Cir. 1978); Commissioner
v. Riss, 374 F.2d 161, 166-167 (8th Cir. 1967), affg. in part,
revg. in part, and dismissing in part T.C. Memo. 1964-190; Melvin
v. Commissioner, 88 T.C. 63 (1987), affd. per curiam 894 F.2d
1072 (9th Cir. 1990); Challenge Manufacturing Co. v.
Commissioner, 37 T.C. 650, 663 (1962); American Properties, Inc.
3(...continued)
with CCMI funds, plus $3,500 in allegedly omitted commission
income paid by CCMI to David. Respondent now concedes that the
$3,500 treated as commission income represents a nontaxable
repayment by CCMI of a loan CCMI had received from David.
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