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agreement and covenant should be treated as a constructive
dividend to Mr. Langdon.
In determining whether an expenditure by a corporation
represents a constructive dividend to the shareholder, it is also
necessary to decide whether the expenditure primarily benefited
the shareholder personally rather than furthered the interest of
the corporation. Hagaman v. Commissioner, 958 F.2d 684, 690-691
(6th Cir. 1992), affg. on this issue T.C. Memo. 1987-549; Ireland
v. United States, 621 F.2d 731, 735 (5th Cir. 1980); see also
Loftin & Woodard, Inc. v. United States, 577 F.2d 1206, 1214 (5th
Cir. 1978); Hood v. Commissioner, 115 T.C. 172, 179-180 (2000)
Where the expenses are those of the shareholder, the showing
a corporation must make to deduct those expenses is a strong one.
To avoid constructive dividend treatment, the taxpayer must show
that the corporation primarily benefited from the payment of the
shareholder's expenses. Hood v. Commissioner, supra at 181.
In the instant cases, BDC did not require Mr. Langdon to pay
his pro rata share of the transaction's selling expenses. Mr.
Langdon received $200,000 for his consulting agreement and
$334,000 for the covenant, or a total of $534,000 of the
$2,017,461 total purchase price. Petitioners have not addressed
this issue, either at trial or on brief; we thus deem the issue
waived. We hold that BDC's payment of the selling expenses
allocable to Mr. Langdon's consulting agreement and covenant
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