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1984 and 1985, the Capriole was at all times available for
Elvin's personal use. Elvin personally guaranteed the $80,000
loan, and the loan proceeds of $79,880 were used by Elvin to
purchase the Capriole.
It is significant that Elvin created false documentation to
reflect incorrectly that the Capriole was received by YOC as a
trade-in on a new automobile. On the log book and on the guest
register, Elvin, not YOC, was indicated as owner of the Capriole.
YOC paid all of the expenses relating to the Capriole, and
YOC deducted these expenses in 1984 and 1985 as business
expenses. All of the payments made by YOC relating to the
Capriole benefited Elvin personally.
We conclude that although YOC held nominal legal title to
the Capriole, Elvin is to be treated as the owner thereof. The
$80,000 transferred from YOC to Elvin to provide funds to
purchase the Capriole are to be treated as a constructive
dividend to Elvin. Additionally, the $90,635 for 1984, and the
$133,179 for 1985, claimed as business expenses relating to the
Capriole are disallowed to YOC and are treated as constructive
dividends to Elvin.
Even if we were to conclude that YOC should be treated as
owner of the Capriole, the fair rental value of the Capriole for
the two years that the Capriole was available for Elvin's use
would be approximately $438,000 per year ($1,200 daily rental
value times 365 days), which is more than the constructive
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