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a computation for entry of decision for petitioners' 1989 through
1992 taxable years. Petitioners submitted a computation for 1990
that is different than respondent's computation. We must decide
whether constructive distributions received by petitioners in
1990 are nontaxable to them as a return of their basis in a loan
that they made to the distributing C corporation. We hold they
are not. Section references are to the Internal Revenue Code in
effect for the years in issue. Rule references are to the Tax
Court Rules of Practice and Procedure. Petitioners resided in
Northport, New York, when they petitioned the Court.
In Spera v. Commissioner, supra, we held that petitioners
received constructive distributions of $27,941, $160,780,
$53,001, and $15,585 in 1989 through 1992, respectively, on
account of certain building additions that were made by their
wholly owned C corporation. We stated that the taxability of
these distributions was to be determined by the parties in a Rule
155 computation by applying the rules of section 301(c). Id.
We stated that these rules provide that distributions are
dividends to the extent of the distributing corporation's
earnings and profits, that the amounts received in excess of
earnings and profits are a nontaxable return of capital to the
extent of the recipient shareholder's basis in his or her stock
in the corporation, and that any excess is treated as a gain from
the sale or exchange of property. Id.
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