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all the race car expenditures as the ratio of the values of
aircraft owned by Dolphin to the values of aircraft owned by all
the members of the controlled group. Applying Cohan, we allow
Icarus deductions for advertising expenses for fiscal years ended
August 31, 1991, 1992, and 1993, in amounts equal to the
percentages of the costs of aircraft owned by Dolphin multiplied
by the amount of total deductions claimed. This amounts to the
following allowed deductions:
FYE 1991 FYE 1992 FYE 1993
$23,175 $16,462 $37,280
2. Includability of Dolphin's Payments in Mr. Ciaravella's Gross
Income as Constructive Dividends
Respondent argues that the gross receipts of Innovative
representing the race car expenses paid by Dolphin should be
removed from the Innovative Schedules C and recharacterized as
constructive dividends to Mr. Ciaravella. In general, a dividend
is "any distribution of property made by a corporation to its
shareholders". Sec. 316(a). There is no requirement that a
dividend be formally declared or even intended by the
corporation. Loftin & Woodard, Inc. v. United States, 577 F.2d
1206, 1214 (5th Cir. 1978).
The determination of whether a payment by a closely held
corporation is a constructive dividend to its sole shareholder is
ultimately a question of fact. Hardin v. United States, 461 F.2d
865 (5th Cir. 1972). Generally, the determination requires an
inquiry into whether a corporation has conferred an economic
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