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adjustments to petitioners' income are due to respondent's
determination that certain amounts that INI recorded as increases
to the shareholder loan account were actually constructive
dividends. Petitioners assert that the amounts at issue were
loans, not dividends.
In determining the $314,504 constructive dividend income for
1989, respondent included the following as constructive dividend
income: $11,075 of cash distributions; $128,429, the transferred
shareholder loan account; and $175,000, the reclassified loan.
In determining the $27,298 constructive dividend income for
1990, respondent included distributions of cash and INI's one-
half interest in a lot on Spalding Drive, valued at $23,717, as
constructive dividends.
In determining the $116,163 constructive dividend income for
1991, respondent included the following as constructive
dividends: $1,241 of cash distributions; $46,794, the value of
the lot on Papermill Road; and $34,987, the balance due on the
townhouse.
In addition, respondent determined that INI ceased doing
business in 1991; thus, respondent contends that petitioner
received income from the cancellation of indebtedness for the
amount of the loan account in that year. Respondent determined
that the balance of the account in 1991 was $21,767, or in the
alternative if we should decide that the earlier distributions
were bona fide loans, respondent contends the balance was
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