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controlled the corporation that the corporate entity was
destroyed and the corporation became the individual's alter ego).
Thus, we do not include $11,502 from Americana's account in
petitioners' income for 1987.
Petitioners contend that respondent must establish that
Americana and the Earl Kiem escrow account had sufficient
earnings and profits before respondent attributes income (i.e.,
constructive dividends) to petitioners. We disagree. Petitioner
husband controlled the deposits in the Earl Kiem escrow account,
and used those funds to pay petitioners' personal expenses and
petitioners' real property expenses. When a corporation pays a
nondeductible personal expense of its sole shareholder, or
permits a shareholder to use corporate property for a personal
purpose, the shareholder receives a constructive dividend to the
extent the corporation's earnings and profits provide personal
benefit to the shareholder. Secs. 301, 316; Falsetti v.
Commissioner, 85 T.C. 332, 356-357 (1985); Henry Schwartz Corp.
v. Commissioner, 60 T.C. 728, 744 (1973). Petitioners bear the
burden of proving that Americana and the Earl Kiem escrow account
had insufficient earnings and profits to support the constructive
dividend treatment. Hagaman v. Commissioner, 958 F.2d 684, 695
n.16 (6th Cir. 1992), affg. and remanding T.C. Memo. 1987-594;
United States v. Leonard, 524 F.2d 1076, 1083 (2d Cir. 1975);
Truesdell v. Commissioner, 89 T.C. 1280, 1295-1296 (1987).
Petitioners have not carried their burden.
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