- 26 -26
we conclude that Ferrentino used the funds derived from cashing
the delivery service and fuel reimbursement checks solely for his
own benefit.
Since Ferrentino used the check proceeds solely for his
personal benefit, we must then decide whether Ferrentino must
include the value of the check proceeds as dividends in gross
income. Under sections 301(c) and 316(a), dividends are taxable
to the shareholder as ordinary income to the extent of the
corporation's earnings and profits, and any amount received by
the shareholder in excess of earnings and profits is considered a
nontaxable return of capital to the extent of the shareholder's
basis in his stock. Any amount received in excess of both the
earnings and profits of the corporation and the shareholder's
basis in his stock is treated as gain from the sale or exchange
of property. Truesdell v. Commissioner, 89 T.C. 1280, 1294-1295
(1987).
Dividends may be formally declared or they may be
constructive. A constructive dividend is found where a
corporation confers a benefit upon its shareholder in order to
distribute available earnings and profits without expectation of
repayment. Truesdell v. Commissioner, supra at 1295. Therefore,
if Ferrentino is to be required to include the constructive
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