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the intent to violate the tax law. Petitioner argues that there
is an uncertainty as to whether the payments for the construction
expenses should be treated as compensation for services rendered
or nondeductible constructive dividends. We disagree.
Decisional authority clearly provides that a taxpayer may deduct
only amounts intended as compensation for services rendered to
the taxpayer. See King’s Ct. Mobile Home Park, Inc. v.
Commissioner, 98 T.C. at 514; Paula Constr. Co. v. Commissioner,
58 T.C. at 1058.
We, therefore, conclude that respondent has established that
petitioner underpaid its taxes with respect to the construction
expenses and did so with the intent to evade tax. Because
petitioner underpaid its taxes with an intent to evade those
taxes, we hold that the 3-year statute of limitations under
section 6501(a) does not bar respondent from assessing taxes owed
and due. Further, respondent may impose fraud additions to tax
under section 6653(b)(1) and (2) with regard to the underpayment
associated with the deductions of the construction expenses.
B. Credit Card Charges
1. Presumption of Correctness
Because the presumption of correctness attached to
respondent’s deficiency determinations, petitioner bears the
burden of proving that the credit card charges do not constitute
nondeductible constructive dividends. Petitioner has failed to
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