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represents amounts expended for the business interests of other
corporations that are members of the same controlled group as
Dolphin. Because such amounts were not expended primarily for
the personal benefit of Mr. Ciaravella, they do not constitute
constructive dividends and are not includable in his income.
The portion of gross receipts that was paid to the trade
publications and magazines in which Dolphin advertised was
expended for the business interests of Dolphin, not for the
personal interests of Mr. Ciaravella. The portion of gross
receipts that consisted of payments from unrelated third parties
cannot be dividends to Mr. Ciaravella because he had no ownership
interest in those entities.5
3. Business Expenses of Innovative
The next issue concerns the deductions for business expenses
claimed by Mr. Ciaravella on his Innovative Schedules C for his
1992 and 1993 returns. Under section 162, an ordinary and
necessary expense is deductible if it is "paid or incurred during
the taxable year in carrying on any trade or business". Under
section 167, depreciation deductions are allowed for the wear and
5 Respondent argues only that the Schedule C gross receipts
should be recharacterized as dividends. Although respondent
mentions in passing that the gross receipts should be
recharacterized as dividends (or other income), respondent does
not provide any analysis or argument for treatment as other
income of the amounts of gross receipts constituting payments
from parties other than Dolphin. Accordingly, we do not reach
that question, which would, among other things, require us to
deal with the question of the proper treatment of expenses
incurred in earning such income. Cf. sec. 183(b).
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