- 13 - expectation of repayment, see Magnon v. Commissioner, 73 T.C. 980, 983-994 (1980), and second, the benefit conferred by the corporation must primarily advance the shareholder’s personal interest as opposed to the business interest of the corporation, see Jack’s Maintenance Contractors, Inc. v. Commissioner, 703 F.2d at 156. Whether the corporate journal entry reducing the debt reflected by the Receivable from Officer account resulted in a constructive dividend to Mr. Lechner, the individual shareholder, does not turn on whether the reduction primarily benefited the corporation or the shareholder; this is the second prong question addressed by Hood and Jack’s Maintenance Contractors. Stainless has conceded that it is not entitled to the deduction, and thus that it received no primary benefit, or at least that any benefit that it might have received is to be disregarded for tax purposes. Our sole question for decision is a first prong question: Whether the action by Stainless in reducing the amount of the debt on its accounting records conferred an economic benefit on Mr. Lechner without expectation of repayment that constituted or evidenced a distribution to him or for his benefit that should be treated as a constructive dividend. Respondent’s briefs characterize the distribution as cancellation of indebtedness. Because the deficiency notice did not mention cancellation of indebtedness, petitioners argue thatPage: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011