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membership was purchased in anticipation of Rhys' returning to
NITCO's employ, because a waiting list existed at the country
club for memberships. They assert that, following his resumption
of employment with NITCO, the membership would be used by Rhys in
connection with NITCO's business activities.
In view of the substantial expenditures NITCO made for
NICATV's and Rhys' benefit that we have held to be constructive
dividend income to Mr. Mussman, we are extremely skeptical of
petitioners' claims with respect to NITCO's payment of the club
initiation fee for Rhys. Petitioners have failed to establish
that the expenditure was a business expenditure of NITCO, rather
than constructive dividend income to Mr. Mussman. Consequently,
we sustain respondent's determination that the $1,800 expenditure
to obtain a country club membership for Rhys was constructive
dividend income to Mr. Mussman. Rule 142(a).
Cellular Telephone and Other Investments
In the notice of deficiency issued to the Mussmans,
respondent determined that $88,484 of legal expenditures that
NITCO made with respect to certain "cellular telephone and other
investments" was constructive dividend income to Mr. Mussman in
1989. NITCO claimed no deduction for these expenditures.
Petitioners contend that a substantial portion of the
$88,484 in total expenditures was actually paid by NITCO in 1988,
rather than in 1989, and that these 1988 payments were
erroneously determined by respondent to be constructive dividend
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