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concedes that portion of his determination in excess of the
parties’ stipulation.
OPINION
I. Constructive Dividends
Respondent determined that each of the individual
petitioners before us had taxable income from receipt of
constructive dividends in 1994 and 1995 in amounts of $4,457,835
and $2,504,822, respectively. See sec. 61(a)(7). Respondent
primarily argues that Mr. Cordes is properly taxable for all of
the constructive dividends, rather than any of the other
individual shareholders, because respondent contends Mr. Cordes
was the beneficial owner of all the CFC and ECI stock during the
years at issue.12 Respondent alternatively argues that each
individual petitioner is taxable on receipt of constructive
dividends in amounts proportionate to his or her record
ownership.
Petitioners argue that although Mr. Cordes completely
controlled CFC and ECI, Mr. Cordes cannot be held to have
received constructive dividends because he did not hold stock in
those corporations in the taxable years before us. In response
to respondent’s alternative argument, petitioners argue that
because Mr. Cordes completely controlled CFC and ECI, and the
record owners had no knowledge of, did not authorize, or did not
12Respondent concedes that if we find Mr. Cordes was the
beneficial owner of all the CFC and ECI stock during the years at
issue, then the other individual petitioners are not liable for
tax on receipt of constructive dividends for those years.
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