American Valmar International Ltd., Inc., et al. - Page 19

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            to the condominium.  Petitioners have failed to prove that such                              
            amount was disbursed at the direction of Diapazon.                                           
                  Except with respect to the transfer, respondent’s                                      
            determination of a deficiency is sustained to the extent it                                  
            relates to respondent’s disallowances of purchases.                                          
            IV.  Constructive Dividends                                                                  
                  During 1991 and 1992, Markovski received seven deposits into                           
            his bank accounts by wire transfer from abroad (the Markovski                                
            deposits).  Six of those deposits were made in 1991 and totaled                              
            $746,340.  The seventh deposit was made in 1992 in the amount of                             
            $1,600,000.  Respondent treated the Markovski deposits as if they                            
            had been received by (and belonged to) American Valmar and had                               
            then been distributed to Markovski with respect to his stock.                                
            Respondent made positive adjustments to American Valmar’s income                             
            on the basis that the Markovski deposits were items of gross                                 
            income to American Valmar.2  Respondent made positive adjustments                            
            in Markovski’s income on the basis that the Markovski deposits                               
            constituted constructive dividends from American Valmar.3                                    

            2     In his notices of deficiency to American Valmar, respondent                            
            labels the adjustments to American Valmar’s income “Receipts From                            
            Shareholder Account”.  The adjustments are $613,410 and                                      
            $1,600,000 for American Valmar’s taxable years ending June 30,                               
            1991, and 1992.  Inexplicably, respondent has omitted making an                              
            adjustment to American Valmar’s 1992 income for the Markovski                                
            deposits in the amounts of $52,730 and $80,200 received by                                   
            Markovski on July 1 and 12, 1991, respectively.                                              
            3     The adjustment for 1991 totaled $803,477, which is $57,137                             
            greater than the Markovski deposits received during 1991.                                    
                                                                           (continued...)                




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