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Respondent contends that the loft was used by petitioner as
a residence and, therefore, the corporation's payment for the
construction of the loft constitutes a constructive dividend to
petitioner. Respondent contends that petitioner lived in the
office building because of (1) the use of the office address on
petitioner's income tax returns and receipt of mail at the office
building; (2) the presence of the cabinet and mattress with box
spring in a room in the loft during July 1994; (3) the 4-hour
drive from the condominium to the office building; and (4) the
presence of the kitchen and shower in the loft.4
Petitioner used the office address on his returns and
received his mail at the office even when he lived in the Castro
Valley house. Furthermore, it is not unusual for a business to
have a kitchen or bathroom with a shower. When petitioner was in
the San Francisco Bay area he stayed with friends or his mother.
We found petitioner to be credible and his testimony to be
candid and forthright. Additionally, petitioner's accountant
4The agent testified that petitioner said he lived in
Incline Village but also on several occasions said he "lived in
the business since 1988". Respondent contends that petitioner's
statement was an admission that petitioner resided in the loft.
Assuming without finding that petitioner made such a statement,
we think that the statement is ambiguous. During the years in
issue, not only did petitioner work full time as an employee of
the corporation, he also was the sole proprietor of two other
businesses (Sungate Travel and Sungate Tours) that were located
at another location and generated over $1 million in gross
receipts each year. Under the circumstances, we do not think
that "lived in the business" would necessarily mean that
petitioner was residing in the loft.
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