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The $5,997 that Prevatte and Mike Reaves received from the
Lumberton Auction checks written to them are not constructive
dividends to Mr. and Mrs. Reaves. The other Lumberton Auction
checks payable to Reaves Livestock and S&J are not constructive
dividends to Mr. and Mrs. Reaves because there is uncontradicted
evidence that the proceeds went to the payees and did not go to
Mr. and Mrs. Reaves.
One Lumberton Auction check for $95 dated April 2, 1986, was
payable to and endorsed by Mr. Reaves. We conclude that this
check is income to Mr. Reaves.
Respondent contends that Mr. Reaves owned Lumberton Auction.
We disagree. Mr. Reaves denied ownership, and respondent offered
no evidence to the contrary.
Respondent contends that the First Citizens accounts are Mr.
and Mrs. Reaves' personal accounts. Thus, respondent contends
that the Lumberton Auction checks are constructive dividends
because some of them were payable to S&J. We disagree. Mr.
Reaves used these accounts in part as Reaves Livestock accounts.
Reaves Livestock's bookkeepers wrote checks and kept the bank
records for the First Citizens accounts. Most of the checks
written on the S&J account and many written on the George K.
Reaves account were for business purposes. The Lumberton Auction
Co. checks payable to a First Citizens account are not
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