- 87 -
an unknown matter, was constructive dividend income to Mr.
Mussman for 1989.
With respect to the expenditures NITCO made to LMN&G,
petitioners concede that $4,400 was constructive dividend income
to Mr. Mussman in 1989. As to the work LMN&G performed in
connection with the Indiana RSA #1 venture and for Rhys,
petitioners have failed to establish that NITCO's payment for the
work furthered NITCO's interest and was of direct and substantial
benefit to NITCO. As we have found, Mr. Mussman intended and
planned to have the cellular telephone rights held by Serv-U-
Cellular, a corporation that he and one or more of his sons,
individually, would own. Rhys was not an employee of NITCO until
after July 1, 1989, and the work LMN&G performed for Rhys was
billed before that date. Consequently, we hold that all the
expenditures that NITCO made to LMN&G were constructive dividend
income to Mr. Mussman for 1989. Rule 142(a).
With respect to the balance of NITCO's expenditures that has
not been attributed to specific matters, petitioners have failed
to establish that these payments furthered NITCO's interest and
were of direct and substantial benefit to NITCO. Consequently,
we hold that these payments were constructive dividend income to
Mr. Mussman for 1989.22 Rule 142(a).
22These constructive dividends to Mr. Mussman, of course,
will increase NITCO’s dividend paid deduction in computing
NITCO’s accumulated earnings tax liability. See sec. 535(a).
Page: Previous 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 NextLast modified: May 25, 2011