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the form of forgone interest and find them either irrelevant or
lacking merit.2 Respondent's determinations are sustained.
B. Petitioners' Personal Expenses Paid by KHTC
If a corporation pays for the personal expenses of its
shareholders, it is well established that the shareholders are
charged with additional distributions from the corporation,
taxable to them as dividend income if the corporation has
sufficient earnings and profits. Melvin v. Commissioner, 88 T.C.
63, 79 (1987), affd. per curiam 894 F.2d 1072 (9th Cir. 1990);
American Properties, Inc. v. Commissioner, 28 T.C. 1100, 1115
(1957), affd. 262 F.2d 150 (9th Cir. 1958).
In their petition, their opening brief, and their reply
brief, petitioners failed to address respondent's determinations
that they are properly charged with constructive dividends for
KHTC's payment of their personal expenses. The stipulations of
fact include only a bald assertion by petitioners that such
amounts were paid for business expenses. The only evidence in
the record related to these expenses is the revenue agent's
explanation of why he determined that the amounts paid for such
expenses constitute constructive dividends.
Based on the record, we find that petitioners have failed to
prove any error in respondent's determinations that they are
properly charged with constructive dividends for KHTC's payment
2 The two cases relied upon by petitioners in their
briefs are not related in any manner to the issue of whether the
loans in issue are subject to section 7872. See Genest v. John
Glenn Corp., 696 P.2d 1058 (Or. 1985); Delaney v. Taco Time
Intl., Inc., 681 P.2d 114 (Or. 1984).
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