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all of the proceeds were used by the corporate petitioner, but
argue that if any such proceeds are found to be used by the
Suttons, such funds should be characterized as repayments of loans
Mr. Sutton made to the corporate petitioner.
Some of the proceeds of these cashed checks were deposited
into the Suttons' personal bank account. It is not known what
happened to the remainder. On the record before us, we conclude
that Mr. Sutton retained these funds for his personal use. Rule
142(a).
Sections 301 and 316 provide that a distribution of property
made by a corporation with respect to its stock is a taxable
dividend to the extent of its earnings and profits. When a
shareholder receives an economic benefit from the corporation
without an expectation that that benefit be repaid, the
shareholder has received a constructive dividend. Williams v.
Commissioner, 627 F.2d 1032, 1034 (10th Cir. 1980), affg. T.C.
Memo. 1978-306. However, where a shareholder has made a loan to
the corporation, the corporation's repayment of that loan would
not be taxable to the shareholder. Theodore v. Commissioner, 38
T.C. 1011, 1040-1041 (1962).
In order for any monies that Mr. Sutton may have retained
from these cashed rebate and coupon checks to be repayments from
the corporate petitioner to Mr. Sutton, there must have been a
bona fide loan from Mr. Sutton to the corporate petitioner.
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