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value because of the existence of the voting trust agreement and
the potential dilution of WVI stock as a consequence of Dr. Gow’s
right to have 10,000 shares of WVI stock issued to her.
Issues 2 and 3. Constructive Dividends
We next examine whether WVI’s payments of petitioners’
expenses for trips to Key West and Hawaii, as well as WVI’s
payments for the acquisition of the animal trophy collection,
constitute constructive dividends to petitioners.
The amount of these expenditures is not in dispute. Rather,
the dispute centers upon whether these expenditures were made
primarily to advance petitioners’ personal interests or were for
legitimate business interests of WVI. Petitioners maintain that
the trips to both Key West and Hawaii generated numerous ideas and
concepts that were considered and later incorporated by Powhatan
Associates in the time-share resort. Further, petitioners maintain
that the amounts expended on the procurement of the animal trophy
collection created an amenity intended to attract buyers of the
time-share intervals. Respondent, on the other hand, maintains
that these expenditures were made primarily to provide a
substantial personal benefit to petitioners.
It has long been recognized that when a corporation makes an
expenditure or distribution out of its earnings and profits
(without an expectation of repayment) primarily to confer a
substantial personal benefit to a shareholder, the value of the
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