Yarbrough Oldsmobile Cadillac, Inc. - Page 22

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          Additional Personal Expenses of Elvin Paid by YOC                           
          and Claimed by YOC as Deductible Business Expenses                          
               During 1983 through 1986, YOC paid numerous additional                 
          personal expenses of Elvin that were claimed by YOC as deductible           
          business expenses.  Elvin instructed YOC's employees to pay these           
          expenses and to reflect these expenses in YOC's books and records           
          as YOC's business expenses.                                                 
               The schedules below set forth by year the amount of these              
          additional personal expenses of Elvin that YOC paid and claimed             
          as deductible business expenses.  The schedules also indicate the           
          manner in which these expenses were reflected in YOC's books and            
          records and the benefit that Elvin received as a result of the              
          expenses.  On audit, respondent disallowed the business expense             
          deductions claimed by YOC with respect to the expenses set forth            
          in the schedules, and respondent treated them as constructive               
          dividends to Elvin.  In a number of instances (identified as "Not           
          deducted" in the column reflecting the manner in which the                  
          expenses were treated on YOC's books), respondent determined                
          (with respect to certain expenses that were paid by YOC for                 
          Elvin's benefit but not deducted as business expenses by YOC)               
          that such expenses represented constructive dividends to Elvin.             
          The schedule also reflects which expenses petitioners now concede           
          should be treated as nondeductible personal expenses and as                 
          constructive dividends to Elvin.                                            







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Last modified: May 25, 2011