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able dividend to petitioner for that year. Petitioner challenges
this conclusion, claiming that the leasehold improvements were
not taxable dividends.
Loans
During the taxable years at issue, Goshorn made transfers of
cash to petitioner. There are no notes memorializing any of
these cash transfers.
Goshorn's transfers to petitioner were disclosed in
Goshorn's financial statements that were given to third parties.
Goshorn has never declared a dividend. Respondent determined in
the notice of deficiency that these advances, characterized as
loans on Goshorn's financial statements, were in fact dividends
to petitioner. Respondent determined that petitioner received
dividend income in the following amounts:
Tax Year Amount
1987 $21,040
1988 216,621
1989 52,775
1990 102,196
According to its 1986 fiscal year Federal income tax return,
as of November 1, 1987, Goshorn had no outstanding loans to
stockholders and had unappropriated retained earnings of
$867,958. During Goshorn's tax year ending October 31, 1988,
Goshorn made transfers of $350,059.92 to or for the benefit of
petitioner, and petitioner was credited with $168,1243 in reduc
3The $168,124 credited to petitioner during the fiscal year
ending Oct. 31, 1988, consisted of two overall amounts. The
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