Allied Marine Systems, Inc. - Page 16

                                       - 16 -                                         
               Because petitioner has failed to prove error in respondent's           
          determination, we need not address respondent's alternative                 
          position that the payments represented wages to petitioner.  We             
          note, however, petitioner's argument:                                       
               There is no dispute that Gibbon's payments were unique                 
               among the employees and stockholders of the                            
               Corporation.  The distinction is that unlike the other                 
               employees and stockholders, Gibbons was the only one to                
               loan the Corporation substantial sums of money, to                     
               advance on behalf of the Corporation funds for its                     
               business expenses and to provide the Corporation with                  
               the use of his depreciable equipment for the                           
               Corporation's business uses.  The unique payments were                 
               in recognition and partial satisfaction of these unique                
               activities on its behalf.                                              
          Inasmuch as petitioner was not paid any salary during 1988 or               
          1989, petitioner's argument suggests that he was compensated by             
          the payments in dispute.  The tax consequences to petitioner                
          would be the same.  Allied has not timely argued that it would be           
          entitled to deduct the payments as compensation.  Respondent's              
          determination that petitioner received constructive dividends in            
          the amounts of $40,859 and $31,608 for 1988 and 1989,                       
          respectively, will be sustained.                                            
          Sections 121 and 1034                                                       
               Respondent determined that petitioner is not entitled to               
          exclude or to defer any gain from the sale of the Solomons house.           
          Petitioner contends that he is entitled to exclude $125,000 of              
          gain under section 121 and to rollover $89,667 of gain under                
          section 1034.                                                               






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