- 82 -
We conclude that petitioners have failed to establish that
these 1988 and 1989 utility bill payments with respect to the 301
Washington Street property furthered NITCO's interest and were of
direct and substantial benefit to NITCO. The payments primarily
benefited Rhys and NICATV. On the record presented, we also are
not able to determine the extent of the storage use NITCO made of
the building. We decline to speculate and allocate a portion of
the utility bill payments to a business use of NITCO.20
Petitioners have further failed to establish that the remaining
balance of the disputed 1988 "open account loans" furthered
NITCO's interest and directly and substantially benefited NITCO.
We hold that Mr. Mussman had constructive dividend income of
$7,058.11 for 1988 and $3,263.51 for 1989, as a result of the
"open account loans".21
Country Club Initiation Fee
In early 1989, NITCO paid an $1,800 initiation fee on behalf
of Rhys to obtain a country club membership for Rhys.
Petitioners have acknowledged that Rhys was not a NITCO employee
until after July 1, 1989. However, they argue that the club
20The utility bill payments were for electricity, gas,
sewage, and water services provided to the 301 Washington Street
property. To the extent that NITCO made some incidental use of
the building for storage, it is difficult to quantify the actual
benefit that resulted to NITCO from the payments.
21From petitioners' arguments in their posttrial briefs
concerning this issue, we gather that petitioners are not
contending that NITCO had made a bona fide loan to Mr. Mussman
with respect to these payments.
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