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Under section 61(a)(7), gross income includes the receipt of
any dividend. A dividend is defined in section 316(a) as "any
distribution of property made by a corporation to its
shareholders". There is no requirement that the dividend be
formally declared or even intended by the corporation. Loftin &
Woodward, Inc. v. United States, 577 F.2d 1206, 1214 (5th Cir.
1978). It is well settled that expenditures made by a
corporation for the personal benefit of a shareholder are
constructive distributions to the shareholder in amounts equal to
the fair value of the benefits involved. Roy v. Commissioner,
T.C. Memo. 1997-562, affd. without published opinion 182 F.3d 927
(9th Cir. 1999); Halpern v. Commissioner, T.C. Memo. 1982-31.
The test for constructive dividends is twofold: The expenses
must be nondeductible to the corporation, and they must represent
some economic gain, benefit, or income to the taxpayer. Meridian
Wood Prods. Co. v. United States, 725 F.2d 1183, 1191 (9th Cir.
1984). The mere fact that expenses have been disallowed as
deductions to the corporation does not necessarily make the
payments constructive dividend income to the shareholder under
section 61(a)(7). Erickson v. Commissioner, 598 F.2d 525, 531
(9th Cir. 1979), affg. in part and revg. in part T.C. Memo. 1976-
147; Ashby v. Commissioner, 50 T.C. 409, 418 (1968); Donnelly v.
Commissioner, T.C. Memo. 1974-226. However, if this Court found
that it was impossible to determine whether the disallowed
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