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not convince us that the fair market value of the tangible assets
at the time of the distribution was anything other than $59,455.
Accordingly, the corporation did not realize recapture income on
the distribution.
Consulting Fees
The corporation paid the shareholders $40,000 in addition to
their salaries for 1992, which the corporation deducted as
consulting fees. Respondent determined that the corporation was
not entitled to the subject deduction and that the shareholders
must report the amounts they received with respect to this
deduction as dividend income. No documentary evidence has been
presented to establish that the $40,000 deducted by the
corporation was paid to the shareholders for services provided to
the corporation in the year deducted. The corporation has failed
to meet its burden of establishing that it is entitled to deduct
the $40,000 payment to the shareholders in 1992 as consulting
fees or that it should not characterize the amounts as dividends
as respondent contends.
Petitioners Robert and Patricia DeMarta conceded
respondent's determination in regard to this issue. Petitioner
William Norwalk reported the $16,680 as business income and
deducted $1,425 as business expenses. Respondent adjusted this
by determining that the $16,680 was unreported dividend income
and simultaneously reducing reported business income by $15,255
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