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CFC 1994 1995
Cash distributions to John Cordes5 $800,000 -0-
Cash distributions to Jean Ann Richard 800,000 $120,000
Cash distributions to Mrs. Cordes 484,651 400,000
Sale of 1994 and 1995 notes 1,733,608 1,073,608
Diversion of checks from bad debts6 12,282 -0-
Diversion of unbooked CFC income 71,910 -0-
Unexplained source of funds 405,724 211,612
Total from CFC 4,308,175 1,805,220
Total constructive dividends 4,457,835 2,504,822
Below, we set out the facts relevant to respondent’s
determinations regarding constructive dividends.
A. Constructive Dividends From ECI
1. Diversion of Checks From Unidentified Loans,
Diversion of Tag Refunds, and Excess Payoffs
Petitioners concede that the amounts respondent determined
ECI distributed as diverted checks on unidentified loans,
diverted tag refunds, and excess payoffs constitute constructive
dividends to ECI’s shareholder(s) for 1994 and 1995.
2. Cash Distributions to Mr. Cordes
In 1995, ECI issued checks to Mr. Cordes in the amounts of
$200,000 and $400,000. ECI recorded the amounts of the checks in
its “Paid-In Capital” account.
5The $800,000 was a check made payable to John Cordes.
Although the parties stipulated that it was a cash distribution
to Edmund J. Cordes, we treat it as a cash distribution of
$800,000 to John Cordes, and we refer to it as such.
6The parties refer to these items as “Diversion of checks
from Chapter 13”. The parties have failed to explain fully the
significance of chapter 13, and we surmise by a careful review of
the record that these checks were paid to CFC from chapter 13
trustees representing funds CFC received as a creditor to
bankruptcy estates.
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Last modified: May 25, 2011