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Hinman, with complete and accurate information regarding the 1994
and 1995 notes.
In connection with the 1994 and 1995 notes, CFC paid costs
associated with repossessions of financed vehicles in the amounts
of $6,879 and $16,175 in 1994 and 1995, respectively. CFC
deducted these payments on its 1994 and 1995 Forms 1120, U.S.
Corporation Income Tax Return, respectively.
5. Diversion of Checks From Bad Debt Recoveries,
Diversion of Unbooked CFC Income, and Unexplained
Source of Funds
The parties stipulated that the amounts respondent
determined CFC distributed as diverted checks from bad debt
recoveries and as diverted unbooked CFC income constitute
constructive dividends for 1994 to the extent of $10,380 and
$71,910, respectively. Respondent concedes that portion of his
determination in excess of the parties’ stipulation.
As set forth above, respondent determined that CFC sold the
1994 and 1995 notes to Mr. Cordes for prices below their fair
market value. Respondent determined that the prices at which
they were sold were $1,600,700 and $4,139,512, respectively, but
was unable to determine the source of all those funds used to
purchase the notes at those prices. Respondent determined that
the unexplained source of funds constituted a further
constructive dividend to CFC’s shareholder(s). After
stipulations, the parties agree that, with respect to these
items, CFC’s shareholder(s) received constructive dividends in
the amount of $45,702, both in 1994 and in 1995. Respondent
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