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OPINION
A dividend is a distribution of property by a corporation to
its shareholders out of its earnings and profits. Sec. 316(a).
Dividends are taxable as ordinary income to shareholders to the
extent of the earnings and profits of the corporation. Sec. 316. A
dividend need not be formally declared or even intended by the
corporation. Noble v. Commissioner, 368 F.2d 439, 442 (9th Cir.
1966), affg. T.C. Memo. 1965-84; Commissioner v. Makransky, 321 F.2d
598 (3d Cir. 1963), affg. 36 T.C. 446 (1961); Sachs v. Commissioner,
277 F.2d 879 (8th Cir. 1960), affg. 32 T.C. 815 (1959).
Additionally, the distribution need not be made to a shareholder,
but only for the shareholder's personal benefit. Cirelli v.
Commissioner, 82 T.C. 335, 351 (1984); Edgar v. Commissioner, 56
T.C. 717 (1971). The determination of whether a constructive
dividend has occurred is a question of fact which depends on each
case. Hardin v. United States, 461 F.2d 865 (5th Cir. 1972).
The only argument petitioners advance with respect to the
royalty payments is that the full amount of such payments is
deductible as an ordinary and necessary business expense and
therefore cannot be a constructive dividend. As discussed supra, we
have found that the appropriate royalty rate for the patents
licensed pursuant to the Tri-Podd license agreement is 9 percent.
To the extent that royalty payments were made in excess of 9
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