Midwest Stainless, Inc. and Robert A. and Mary J. Lechner - Page 13

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            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 that                           

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