- 26 -
to ABL. These services were not rendered on behalf, or under the
control, of CAI.
We conclude that the first prong of the requisite two-prong
test is not met.19 Accordingly, we hold for respondent. With
respect to petitioners' arguments for a contrary holding, we find
no credible evidence in the record to persuade us that the
organization of CAI was required by Ashland, or that petitioner
was not a beneficial owner of CAI. Accordingly, we reject
petitioners' allegations to that effect.20
Issue 2. Dividend Income
Respondent determined that petitioner received constructive
dividends of $22,125 and $19,510 from BarSon during 1980 and
1981, respectively. Respondent determined that the 1980 dividend
resulted from: (1) BarSon's payment of $2,500 to Finley Kumble
for petitioners' personal legal fees, (2) $1,000 in checks drawn
on BarSon's account for petitioners' primary benefit, and
(3) BarSon's payment of $18,635 to contractors for work performed
19 In this regard, we also find relevant that petitioner and
Dr. Young performed all work necessary to find a source of oil
for Ashland. See Zand v. Commissioner, T.C. Memo. 1996-19 (under
facts similar in some respects to those here, individual taxed as
earner of commissions paid to corporation).
20 We also reject petitioners' allegations that petitioner
was ignorant on the formation and operation of CAI, being led
astray by the unethical and self-serving conduct of Finley
Kumble. The record (including evidence of petitioner's
education, intelligence, and business acumen) leads us to
conclude that this argument is meritless.
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