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Cir. 1990), the corporations characterized payments to their
officer/shareholders as dividends rather than wages. In those
cases, the courts found that the payments were in reality
remuneration for employment and therefore subject to Federal
employment taxes. Spicer Accounting, Inc. v. United States, supra
at 93; Radtke v. United States, supra at 1197. Petitioner
attempts to distinguish its case from the Spicer and Radtke cases
because petitioner reported the payment to Dr. Sadanaga as a
distribution of its net income, which Dr. Sadanaga reported as
nonpassive income from an S corporation. But as stated previously,
we find that the distributions were remuneration for services
provided by Dr. Sadanaga. Thus, the “dividends” in the Spicer and
Radtke cases are indistinguishable from the distributions in this
case.
Petitioner also misstates the findings and conclusions of this
Court in Joly v. Commissioner, T.C. Memo. 1998-361, affd. without
published opinion 211 F.3d 1269 (6th Cir. 2000). Petitioner
asserts that the corporation in the Joly case was compelled to
treat income distributed to its shareholders as wages for the
reason that the corporation and shareholders could not prove that
any stock was issued to the shareholders. To the contrary, the
Court found that part of the distributions to the two shareholders
was compensation for services and, thus, constituted wages subject
to Federal employment taxes. The balance of the distribution was
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