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the payments will be includable in income under section 61(a)(1).
Paula Constr. Co. v. Commissioner, 58 T.C. 1055, 1059 (1972),
affd. without published opinion 474 F.2d 1345 (5th Cir. 1973).
Because petitioner is a shareholder of HIEI, it is also
possible that the distributions might be considered to be
constructive dividends. Constructive dividends can be identified
when value passes from the corporation to the shareholder without
the shareholder's giving something of substantially equivalent
value in return. United States v. Smith, 418 F.2d 589, 593 (5th
Cir. 1969). Neither party alleges the distributions are
constructive dividends, and we find that the record does not
support such a finding. See Alterman Foods, Inc. v. United
States, 505 F.2d 873, 875 (5th Cir. 1974). We therefore limit
our analysis to whether there was the requisite intent for the
payments to constitute compensation for services, or whether, as
petitioners contend, the distributions were bona fide loans.
We note that we have always examined transactions between
closely held corporations and their shareholders with special
scrutiny. Electric & Neon, Inc. v. Commissioner, 56 T.C. 1324,
1339 (1971), affd. without published opinion sub nom. Jiminez v.
Commissioner, 496 F.2d 876 (5th Cir. 1974). As previously
stated, in deciding whether the payments were disguised
compensation for services, we look to the intent of the parties.
Paula Constr. Co. v. Commissioner, supra at 1059. Whether such
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