- 14 -- 14 -
Respondent relies on Crowley v. Commissioner, 962 F.2d 1077
(1st Cir. 1992), affg. T.C. Memo. 1990-636, for the proposition
that the unpaid funds transferred from Activewear to Jackson were
constructive dividends to petitioner. We disagree. In Crowley
v. Commissioner, supra at 1078-1079, the taxpayer used corporate
funds; here, petitioner did not use the unpaid loan balances.
The taxpayer in Crowley did not intend to repay the funds at
issue, id. at 1081; here, petitioner and Activewear expected
Jackson to repay the loans.
Respondent contends that the facts in this case differ from
those in Gilbert v. Commissioner, 552 F.2d 478 (2d Cir. 1977),
revg. T.C. Memo. 1976-104, in which we held that corporate
payments were not constructive dividends. We disagree. The
facts are stronger for petitioner in this case than they were for
the taxpayer in Gilbert. The taxpayer in Gilbert v.
Commissioner, supra at 479, 481, withdrew funds from a
corporation which he intended and expected to repay. He used
funds in part to benefit the corporation. Id. at 481. The U.S.
Court of Appeals for the Second Circuit held that the withdrawals
were not income to the taxpayer. Here, petitioner did not
personally withdraw funds or use them for his own benefit.
Petitioner reasonably believed that Jackson would repay
Activewear.
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