- 21 -
and revg. in part 61 T.C. 624 (1974). The benefit to the
shareholder must be a direct, tangible benefit. Rapid Elec. Co.
v. Commissioner, supra; Ross Glove Co. v. Commissioner, 60 T.C.
569, 595 (1973).
Individual petitioners contend that the bank accounts do not
constitute constructive dividends to them because they did not
receive the funds from the accounts. As we held above, corporate
petitioner has failed to prove that the deposits were made for a
business purpose; i.e., cost of goods sold. Petitioners provided
convoluted and somewhat perplexing reasons for Shin's wanting to
maintain the two-tier payment system. First, as stated above,
Shin wanted to understate its income to offset its inability to
subtract cash expenditures for which it lacked receipts. Because
Eastimpex's payment of the invoice price was cleared through
Taiwan's central bank, petitioners contend that the Taiwanese
Government had a record of the invoice price as income from
sales. Second, Shin viewed the exchange rate used by the central
bank as less favorable than the street rate for U.S. currency and
wanted to receive some funds in U.S. dollars to exchange outside
of the central bank system. Third, Shin maintained the accounts
so that shareholders and employees with a need for U.S. dollars
could have easy access to them as the Taiwanese Government
imposed currency restrictions that impaired the ability to obtain
U.S. dollars.
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