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that Mr. Beck was the sole shareholder of Beck's Liquors during
the years at issue.
II. Constructive Dividends
Section 61(a) defines gross income to include "all income
from whatever source derived," including receipt of a dividend.
Sec. 61(a)(7). A dividend is "any distribution of property made
by a corporation to its shareholders" to the extent of its
earnings and profits.7 Sec. 316(a). "When a corporation confers
an economic benefit upon a shareholder, in his capacity as such,
without an expectation of reimbursement, that economic benefit
becomes a constructive dividend, taxable to the respective
shareholder." Loftin & Woodard, Inc. v. United States, 577 F.2d
1206, 1214 (5th Cir. 1978); see also Magnon v. Commissioner, 73
T.C. 980, 993-994 (1980).
Respondent determined that the following payments by Beck's
Liquors were constructive dividends to Mr. Beck:
1992 1993
Diverted corporate income $115,133 $84,782
Condo association fees 1,014 980
Insurance-condos, vehicles 1,866 1,830
Credit card--personal expenses 14,993 16,193
Auto expense/repairs 7,294 4,679
Miscellaneous 378 254
Advertising/personal ticket use 200 200
7Neither party argued that Beck's Liquors had insufficient
earnings and profits for the distributions to be treated as
dividends.
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