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a separate legal entity. Petitioners cite Knott v. Commissioner,
supra, in support of their position.
In Epstein v. Commissioner, supra, the stockholders in a
corporation established separate trusts for the benefit of their
minor children. On the same day, each of the newly created
trusts made bargain purchases of real property owned by the
corporation. The Court held that the transfers of the property
interests from the corporation to the trusts, to the extent of
the bargain purchases, were constructive dividends to the
stockholders. Id. at 475.
In Johnson v. Commissioner, supra, a stockholder/director of
a bank established a trust naming his grandchildren as principal
beneficiaries and his wife, son, and daughter-in-law as
successive income beneficiaries. Subsequently, the bank procured
split-dollar life insurance policies naming the stockholder as
the insured and paid the premiums therefor. The proceeds of
those insurance policies were payable to the bank to the extent
of the net cash value of the policies at the time of the
shareholder's death, with the remaining policy proceeds being
payable to the trust. This Court found that the shareholder had
received an economic benefit from the bank's payment of the
premiums on the insurance policies and held that he had received
constructive dividends to the extent of such benefit. Id. at
1324.
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