Don A. Chan and Cecilia Chan - Page 25

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            Priscilla constitutes a constructive dividend to individual                                  
            petitioners.                                                                                 
                  Edward and Stanley also received money from the Coast and                              
            First Pacific accounts.  Edward stated that he received the money                            
            because he had a need for U.S. funds, but he could not remember                              
            what he used the money for.  Edward also contends that he repaid                             
            the money to Shin within a short period of time.  Respondent                                 
            suggests that Edward and Stanley may have received these checks                              
            because individual petitioners owed them money or as their take                              
            of a scheme to divert funds from Eastimpex.  However, there is no                            
            evidence that the payments to Stanley and Edward provided any                                
            personal economic benefit to individual petitioners or were for a                            
            purpose of individual petitioners.  Thus, we find that these                                 
            amounts are not constructive dividends to individual petitioners,                            
            regardless of whether Edward and Stanley repaid the amounts to                               
            Shin.                                                                                        
                  Alternatively, individual petitioners argue that Eastimpex                             
            had a valid business reason for any payments under the 1986                                  
            Agreement because the Wan Yang Chen family threatened the                                    
            stability of Shin, which was a major supplier of Eastimpex.                                  
            There was no evidence that Daniel Chen would obtain control of                               
            Shin.  Rather, he threatened to expose the two-tier payment                                  
            system to the Taiwanese Government.  Individual petitioners                                  
            contend that Eastimpex did not receive any benefit from the two-                             
            tier payment system except a delay in having to pay for a small                              




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