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“explained to me that there were services being performed by the
1040s--I mean the individuals when I say the 1040s--to achieve
these special commissions.”
An additional circumstance which weighs against a finding
that actions respected dividend substance is the fact that the
distributions bear little correlation to stockholdings. Mordecai
Deitsch and B. Mayer Zeiler, both of whom held 20-percent
ownership interests in FIL, received no special commissions
during the years at issue. Other 20-percent shareholders were
each paid the full $875,000 to $2,350,000 commission amount. In
contrast, David Deitsch, who was a .0001-percent owner, also
received the full $875,000 to $2,350,000 commission amount. Yet
Sara Deitsch, likewise a .0001-percent owner, received no
payment. Since a dividend is typically understood as a
“distribution * * * to the shareholders of a corporation pro rata
based on the number of shares owned”, Black’s Law Dictionary 478
(6th ed. 1990), petitioners’ position is at least weakened by the
arbitrary dispersal of the special commissions. Hence, there is
nothing in the record which leads us to conclude that the actions
of the individual petitioners or their entities show an honest
and consistent respect for the alleged dividend substance of the
disputed payments.
As regards a unilateral change of position after challenge,
the examining agent further testified: “It was in the May 5th
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