Richard J. and Carol C. Spera - Page 1

                                 T.C. Memo. 1998-225                                  

                               UNITED STATES TAX COURT                                

                    RICHARD J. AND CAROL C. SPERA, Petitioners v.                     
                    COMMISSIONER OF INTERNAL REVENUE, Respondent                      

               Docket No. 130-97.                     Filed June 25, 1998.            

                    C, the wholly owned corporation of H, constructed                 
               a building on land owned by H and W (Ps).  R determined                
               and argues that the expenditures for this building are                 
               constructive dividends to Ps.  Ps argue that the land                  
               was leased to C and that the expenditures were not                     
               constructive dividends to them.                                        
                    Held:  Because the expenditures were made with the                
               primary intention and result of conferring a benefit on                
               Ps, C's expenditures are constructive dividends to Ps                  
               to the extent of C's earnings and profits.                             
                    Held, further, Ps are liable for the accuracy-                    
               related penalties determined by R under sec. 6662(a),                  
               I.R.C., to the extent described herein.                                

               James J. Mahon, for petitioners.                                       
               Monica E. Koch and Andrew Mandell, for respondent.                     

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