- 59 -
percent, such amounts are not ordinary and necessary business
expenses. Consequently, the excess is nondeductible expenditures
made by Powertex for the personal benefit of its shareholders and
constitute constructive dividends to the Podds. See Meridian Wood
Prods. Co., Inc. v. United States, 725 F.2d 1183, 1191 (9th Cir.
1984); Falsetti v. Commissioner, 85 T.C. 332, 356-358 (1985);
Challenge Manufacturing Co. v. Commissioner, 37 T.C. 650, 663
(1962).
With regard to the $250,000 management fee expenses paid by
Powertex to Plus for the 1988 through 1990 taxable years, we held
above that such payments were ordinary and necessary business
expenses pursuant to section 162, and, accordingly, we hold that
these payments are not constructive dividends.
VI. Issue 5: Whether Victor, Jr. Was a Resident of the United
States During 1990
FINDINGS OF FACT
Victor, Jr. is a Canadian citizen. Beginning in 1970, the Podd
family resided at their home at 255 Beverly Avenue, Mount Royal,
Montreal, Canada. During 1984, Victor, Jr. was granted an H-3 Visa
by the United States. On July 6, 1987, Victor, Jr. filed an
application for resident alien immigration status with the
Immigration and Naturalization Service (INS). On July 7, 1987,
Victor, Jr. obtained a United States resident alien green card from
the INS entitling him to resident alien status. From July 7, 1987,
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