- 11 - Video of Guarino’s legal fees conferred a significant economic benefit upon Guarino, Capital Video’s sole shareholder, without an expectation of repayment and was not necessary for the business of Capital Video (i.e., the payment of the legal fees was not necessary for Capital Video to receive Richichi’s protection from extortion). We conclude that the payment by Capital Video of the $93,936 in Guarino’s legal fees should be treated as a constructive dividend to Guarino. As to the $423,101 in legal fees of Capital Video that are disallowed herein as deductible business expenses of Capital Video for its short taxable year ending December 31, 1996, such adjustment mechanically results in additional income to Guarino in that same amount as a result of the corresponding increase in Guarino’s share of the income of Capital Video, as an S corporation. If respondent’s income adjustments against Guarino are sustained herein, as we have done, then Guarino argues that for 1996 he should be entitled to additional miscellaneous itemized business expense deductions (subject to the percentage limitations applicable thereto) in the amount of the constructive dividend and the additional income of Capital Video, as an S corporation, that is to be charged to Guarino. The apparent basis for Guarino’s argument is that if he is to be charged withPage: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Next
Last modified: May 25, 2011