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shareholders and only tangentially benefits the corporation’s
business, the amount of the expenditure may be taxed to the
shareholder as a constructive dividend and is not deductible
under section 162. See Hood v. Commissioner, 115 T.C. ___, ___
(2000) (slip op. at 13-14); Magnon v. Commissioner, 73 T.C. 980,
993-994 (1980); American Insulation Corp. v. Commissioner, T.C.
Memo. 1985-436.
We accept, for the sake of argument, that the appearance of
a business and its grounds can contribute to the success of the
business. We also acknowledge that Holland America’s clients
visited the farm regularly. Most, if not all, of the landscaping
improvements, however, were installed near and surrounding Mr.
and Mrs. Dobbe’s residence. The residence and its grounds were
owned by Mr. and Mrs. Dobbe and were not leased to Holland
America. Although some of the improvements could be seen by
Holland America’s customers who visited the farm for business
purposes,4 the incidental benefit to the corporation does not
trump the primarily personal benefit to Mr. and Mrs. Dobbe.
Petitioners did not introduce any evidence to demonstrate
how much of the landscaping cost, if any, could be allocated to
Holland America’s leasehold interest. Moreover, petitioners
4Some of the improvements, including improvements by the
outdoor swimming pool and areas on the back and side of the
residence, barely were visible to customers entering the
driveway.
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