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Roy's salary. We find the testimony of Mohan Roy and the
accountant credible on this point. Thus, we hold that the
constructive dividends do not include the amount of insurance
premiums paid by Roy, Inc. for 1994 only (there was no
corroboration with respect to the other years in issue).7
Neither Mohan Roy nor his accountant testified with respect to
any other operating expenses (vehicle registration fees,
maintenance and repairs, and gasoline) paid by Roy, Inc. relating
to the Rolls Royce. Respondent conceded on brief that the
depreciation expenses did not constitute constructive dividends to
the Roys.
On the basis of the record before us, we hold that the amount
of constructive dividends paid by Roy, Inc. to the individual
petitioners is the amount of operating expenses paid by Roy, Inc.
for the use of the Rolls Royce during the years in issue, excluding
depreciation, and less the insurance premiums paid in 1994.
7 No evidence was introduced to show that the 1994
insurance premium payments were meant to serve as compensation
even though we found they were included in Mohan Roy's salary.
The payments are deductible only if the corporation intended them
to be compensation for services rendered. See Electric & Neon,
Inc. v. Commissioner, 56 T.C. 1324, 1340-1342 (1971), affd.
without published opinion 496 F.2d 876 (5th Cir. 1974); see also
Goldstein v. Commissioner, 298 F.2d 562, 566 (9th Cir. 1962),
affg. T.C. Memo. 1960-276. As a result, Roy, Inc. is not
entitled to deduct the amount of the 1994 insurance premium
payments as reasonable compensation under sec. 162.
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