- 14 - safe. Petitioner deposited the Bijou's cash receipts; however, petitioner sometimes deposited only one-half of those cash receipts. Petitioner routinely was seen making personal purchases with large sums of cash. Petitioner was even seen making some personal purchases with cash removed from a duffle bag in envelopes resembling the drop envelopes used by the Bijou. Petitioner also routinely sent large sums of cash and money orders to the Screening Room in order to pay that business's weekly expenses. Before its remodeling in 1982, the Screening Room did not generate enough income to cover its expenses. Furthermore, in his plea agreement, petitioner admitted that his unreported income in 1980 was from skimmed cash receipts of the Bijou. From the entire record, we conclude that petitioner routinely took cash from the Bijou's drop safe in 1980, 1981, and 1982 for his own personal use and to pay for the Screening Room's expenses. Generally, where a shareholder diverts corporate funds to his own use, those funds constitute constructive dividends to him and are ordinary income to the extent of the corporation's earnings and profits. See secs. 301(c), 316; Truesdell v. Commissioner, 89 T.C. 1280, 1295 (1987).Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 Next
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