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only when the corporation uses its money or property primarily to
benefit the shareholder. See Laure v. Commissioner, 70 T.C.
1087, 1108 (1978), affd. in part, revd. in part and remanded 653
F.2d 253 (6th Cir. 1981); see also Wilkof v. Commissioner, T.C.
Memo. 1978-496 (“Laure does support the proposition * * * that to
the extent that a taxpayer can show an absence of direct benefit
to himself he may escape constructive dividend treatment”), affd.
636 F.2d 1139 (6th Cir. 1981). We are unable to find that Randy
Hall used its money or property primarily to benefit Mr.
Feinsmith.8
We also do not view Mr. Feinsmith’s amended returns as
indicating that he received cash from the scheme. The fact that
Mr. Feinsmith considered the reported income attributable to the
disallowed deductions, rather than to his conversion of corporate
cash, is seen quickly from the fact that he recognized most of
that income in years other than the years in which the cash was
purportedly received by him upon conversion. A shareholder’s
conversion of cash for his or her personal use is treated as a
constructive distribution of that cash, and such a distribution
is realized by a cash basis shareholder such as Mr. Feinsmith in
the year of conversion. See secs. 301(c), 316; Truesdell v.
8 Of course, a taxpayer such as Mr. Feinsmith may agree to
recognize an item as income in lieu of criminal prosecution. The
fact that he agrees to recognize that income in a year for which
a return has already been filed does not necessarily mean that he
filed that return fraudulently.
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