- 15 -
under review occurred; i.e., at the time of the entry on the
corporate books reducing the debt.
Petitioners make two arguments. With respect to economic
benefit, they argue that treating the accounting entry reducing
Mr. Lechner’s debt to Stainless as a constructive dividend would
give dispositive effect to “bookkeeping subtleties”, of the sort
we deemed “irrelevant” in Halpern v. Commissioner, supra.6
Petitioners assert the need to show an actual corporate payment
or other outlay to justify a finding that Mr. Lechner received a
constructive dividend distribution.
6 We observe that the Court in Halpern v. Commissioner, T.C.
Memo. 1982-31, made the comment about “accounting subtleties” in
rejecting an individual shareholder’s argument that corporate
bookkeeping entries treating as loans advances to him for travel
and entertainment expenses that he never substantiated or repaid
should not be treated as dividends to him:
Halpern contends that the corporation’s method of
recording its expenses should not cause the
corporation’s payment of a legitimate business expense
to result in a constructive dividend to petitioner. We
feel, however, that such bookkeeping subtleties are
irrelevant. The question is whether Halpern used the
amount advanced for his personal benefit or for the
benefit of the corporation.
* * * * * * *
Without evidence that these expenses were for the
benefit of his corporation, we hold that its payment of
these expenses resulted in Halpern’s receiving
constructive dividends in the amount of $6,706.06.
[Halpern v. Commissioner, T.C. Memo. 1982-31, 43 T.C.M.
(CCH) 346, 352, 1982 T.C.M. (RIA) par. 82,031, at 104-
82.]
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