- 38 -
benefit conferred is taxable as a constructive dividend. See secs.
61(a)(7), 301, 316; Ireland v. United States, 621 F.2d 731, 735
(5th Cir. 1980); Loftin & Woodard, Inc. v. United States, 577 F.2d
1206, 1214 (5th Cir. 1978); Hash v. Commissioner, 273 F.2d 248, 250
(4th Cir. 1959), affg. T.C. Memo. 1959-96; Falsetti v.
Commissioner, 85 T.C. 332, 356-357 (1985). A constructive dividend
can take the form of either a distribution of corporate funds, the
use of corporate property for personal purposes, or paying off a
personal expense of the shareholder by the corporation. See
Ireland v. United States, supra; Wall v. United States, 164 F.2d
462 (4th Cir. 1947); Martin v. Commissioner, T.C. Memo. 1997-492;
Yarbrough Oldsmobile Cadillac, Inc. v. Commissioner, T.C. Memo.
1995-538. Control of a corporation by a shareholder as well as a
corporate history of not paying dividends weighs strongly in favor
of finding a constructive dividend. See Yarbrough Oldsmobile
Caddillac, Inc. v. Commissioner, supra; Thielking v. Commissioner,
T.C. Memo. 1987-227, affd. 855 F.2d 856 (8th Cir. 1988).
In determining whether or not the expenditure related to the
business of the corporation, we must ascertain whether the payment
or expenditure has independent and substantial importance to the
paying corporation. See T.J. Enters., Inc. v. Commissioner, 101
T.C. 581 (1993). An expenditure generally does not have
independent and substantial importance to the distributing
corporation if it is not deductible under section 162. See, e.g.,
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