Midwest Stainless, Inc. and Robert A. and Mary J. Lechner - Page 2

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                  entitled to deduct them on his personal returns as                                   
                  Schedule C expenses.                                                                 
                        Held, the reduction of the receivable on the                                   
                  corporation’s books, which reduced L’s debt to the                                   
                  corporation and increased his net worth in a                                         
                  corresponding amount, is a constructive dividend to L.                               

                  Alan L. Billings, for petitioners.                                                   
                  J. Paul Knap and George W. Bezold, for respondent.                                   

                           MEMORANDUM FINDINGS OF FACT AND OPINION                                     

                  BEGHE, Judge:  Respondent determined that petitioners Robert                         
            A. and Mary J. Lechner (Lechners) and Midwest Stainless, Inc.                              
            (Stainless), had the following Federal income tax deficiencies:                            
                  Petitioners             Taxable years           Deficiencies                         
                                                1994                    $128                           
                                                1995              24,184                               
                                    f/y/e Sept. 30, 1994          $159,362                             
                                    f/y/e Sept. 30, 1995                19,956                         
                  Stainless has conceded, among other things, that respondent                          
            properly disallowed a deduction claimed by Stainless for its                               
            reduction of a debt owed by Mr. Lechner, its sole shareholder, in                          
            reimbursement of his payments of legal fees incurred in defending                          
            against his indictment for filing false individual income tax                              
            returns; respondent has conceded that Mr. Lechner was entitled to                          
            deduct those fees, which he did not claim on his individual                                

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