- 28 -
its shareholders. The notice of deficiency issued to
petitioner Jerry Crabtree contains the following
explanation:
It is determined that, for the years ended
December 31, 1992, 1993, and 1994, you received
dividends from the corporation, Crabtree Invest-
ments, in the amount of $320,847, $162,737, and
$210,946, respectively.
Accordingly, your taxable income for the years
ended December 31, 1992, 1993, and 1994, is
increased in the amounts of $320,847, $162,737,
and $210,946, respectively.
The notice of deficiency issued to petitioner Eddie
Crabtree contains a similar explanation. Petitioners bear
the burden of proving respondent’s determination wrong.
See id.
Section 61(a) defines gross income as “all income
from whatever source derived,” including gross income
derived from dividends. See sec. 61(a)(7). Dividends may
be formally declared or they may be constructive. See
Noble v. Commissioner, 368 F.2d 439, 442 (9th Cir. 1966),
affg. T.C. Memo. 1965-84; Commissioner v. Makransky, 321
F.2d 598, 601 (3d Cir. 1963), affg. 36 T.C. 446 (1961);
Sachs v. Commissioner, 277 F.2d 879, 882 (8th Cir. 1960),
affg. 32 T.C. 815 (1959). The determination of whether a
constructive dividend was received is a question that
Page: Previous 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 NextLast modified: May 25, 2011