- 37 -
In Hufnagle v. Commissioner, T.C. Memo. 1986-119, a
corporation made payments to three colleges for the educational
expenses of the shareholder's children. Although the children
were directors of the corporation at the time, the Court found
that the payments were not made for bona fide corporate purposes
but were made in satisfaction of parental desires. We held that
the payments constituted constructive dividends to the
shareholder, as we found that an economic benefit had inured to
the shareholder and his children.
We think that the facts of the cases relied upon by
respondent are distinguishable from those before us. In each of
the above cases, demonstrable economic benefits accrued to the
shareholders and/or their family members from the transfers of
funds by the controlled corporations. Corporate funds were used
to provide for the maintenance, support, or education of the
family members, in satisfaction of obligations with which they or
the shareholders would otherwise have been saddled.
By contrast, in the instant case, although it is true that
expenses for Vance's campaign were paid as a result of the
Corporation's contribution, these obligations were the liability
of the Committee alone. Nothing in the record suggests that
Vance personally guaranteed these debts. Robertson insisted upon
the corporate form for the Committee precisely because of the
limited liability from creditors it offered.
Page: Previous 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 NextLast modified: May 25, 2011