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a. Dealings Between Petitioner and Its Shareholders
Petitioner did not lend money to, or spend funds to
personally benefit, its shareholders.
b. Investment in Unrelated Businesses
Petitioner did not invest in unrelated businesses.
c. Petitioner's Dividend History
Petitioner paid dividends which averaged about 10 percent of
its after-tax income from 1983 through the years in issue.
Dividends averaged about 7.5 percent for the 3 years in issue.
Petitioner paid substantial salaries to its officers from
1983 to 1989. This generally shows that the taxpayer did not
intend to avoid shareholder level taxes. Technalysis Corp. v.
Commissioner, 101 T.C. at 410-411; Bremerton Sun Publ'g Co. v.
Commissioner, 44 T.C. at 588; John P. Scripps Newspapers v.
Commissioner, 44 T.C. 453, 473 (1965).
Respondent points out that petitioner's controller and
Sherwood Gustafson did not know how E.S. Gustafson decided the
amount of dividends to pay, and argues that petitioner's dividend
history was poor in view of its increasing liquidity. Respondent
contends that petitioner's dividends were not sufficient. We
disagree; level dividends may be sufficient. Bremerton Sun
Publ'g Co. v. Commissioner, supra; John P. Scripps Newspapers v.
Commissioner, supra at 473 (the taxpayer paid the same amount of
dividends for 9 years). Respondent relies on Doug-Long, Inc. v.
Commissioner, 72 T.C. 158 (1979). In that case, the taxpayer
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