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and 1989. It is well established that a payment made to a
shareholder's family member can constitute a section 301
distribution by a corporation with respect to the stock of the
shareholder. Green v. United States, 460 F.2d 412, 419 (5th Cir.
1972); Epstein v. Commissioner, 53 T.C. 459, 474-475 (1969).
Under proper circumstances, it is appropriate to hold that a
corporate payment made to or on behalf of a shareholder's family
member represents a distribution by the corporation to the
shareholder, because the shareholder enjoys the use of the
property as much as if the corporation had distributed the
property directly to the shareholder. Epstein v. Commissioner,
supra. In determining whether an expenditure by a corporation
represents income to the shareholder, it is necessary to decide
whether the expenditure primarily benefited the shareholder
personally rather than furthered the interest of the corporation.
Hagaman v. Commissioner, 958 F.2d 684, 690-691 (6th Cir. 1992),
affg. on this issue T.C. Memo. 1987-549; Ireland v. United
States, 621 F.2d 731, 735 (5th Cir. 1980).
Legal Expenses for which Respondent Disallowed Business
Deductions to NITCO
In the notice of deficiency issued to the Mussmans,
respondent determined that the legal expenses for which
respondent disallowed business deductions to NITCO for 1988 and
1989 represented constructive dividend income to Mr. Mussman.
Respondent further determined that these legal expenses were
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