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Burley and Mary claimed an alimony paid deduction for this amount
on their 1994 return. Although their treatment of this amount as
alimony is not in dispute, the proper characterization of amounts
paid for an automobile and related expenses and for medical
insurance premiums remains in issue.
Automobile and Related Expenses
During 1994, Burley's wholly owned corporation, Medlin Motor
Co., Inc. (the dealership), paid for the lease of an automobile
from Ford Motor Credit Corporation (FMCC). Burley provided the
automobile to Alexandra for her use during 1994. Alexandra did
not sign the lease with FMCC.
The dealership paid for the insurance on the automobile. It
also provided Alexandra with a dealership credit card which was
used exclusively for charging gas and other maintenance expenses
for the automobile. The dealership paid for these credit card
charges. It issued Burley a Form 1099-DIV for 1994 which
reflected that he had received a constructive dividend in the
amount of $4,952, the total cost of the lease, insurance, and
credit card charges paid by the dealership during 1994.
Alexandra did not report the $4,952 as alimony received on
her original and amended 1994 returns. Burley and Mary claimed
an alimony paid deduction for this amount on their 1994 return.
In the statutory notices of deficiency, respondent, as a
stakeholder in this case, included the $4,952 in Alexandra's
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