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a dividend appears contrary to a finding of proper reporting.
This concern becomes moot, however, in that we fail to see how
the payments from FIL can on this record be deemed “properly
reported” by DPP either as compensation or as dividends.
The parties stipulated that DPP performed no services for
FIL. This implies that any consulting services rendered to FIL
by members of the Deitsch family were not performed in their
capacity as partners of DPP. DPP thus cannot be said to have
earned income from the business activity of consulting. With
respect to dividends, DPP was at no time a shareholder in FIL.
Hence, if the income in question represents dividends to
shareholders, it is properly reportable only by those
stockholders, not by an entity to whom they never transferred
even nominal title to their shares. We find that the payments
from FIL were not properly reported by DPP.
1. Characterization of the Payments
Having determined that a particular treatment is improper,
we proceed to address proper treatment. To do so, we must
consider both how the payments from FIL are to be characterized
and by whom they are to be reported. As regards
characterization, petitioners maintain on brief that the DPP
payments “were intended as distribution of profits to Flocktex
shareholders”. They then state: “the classification of the
payments as commission by the Israeli accountant is not
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