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actually benefit from the transactions, they received no
constructive dividends. This is not the first time Mr. Cordes
and his family have appeared before us, nor is it the first time
that Mr. Cordes and his family have presented us with a mishmash
of arguments apparently designed to escape the consequences of
the tax laws. Cordes v. Commissioner, T.C. Memo. 2002-124;
Cordes v. Commissioner, T.C. Memo. 1994-377. For the reasons
discussed below, we conclude that, in the taxable years before
us, CFC and ECI conferred certain economic benefits on Mr. Cordes
as beneficial owner of all the stock in those corporations,
without expectation of repayment, and that Mr. Cordes has income
from constructive dividends.
The law in this area is well settled. Section 301(a) and
(c)(1) requires the inclusion in a shareholder’s gross income of
amounts received as dividends. Secs. 61(a)(7), 301(c)(1),
316(a); Hillsboro Natl. Bank v. Commissioner, 460 U.S. 370, 392
(1983); see Ireland v. United States, 621 F.2d 731, 735 (5th Cir.
1980); see also Old Colony Trust Co. v. Commissioner, 279 U.S.
716, 729-731 (1929). Section 316(a) defines a dividend as “any
distribution of property made by a corporation to its
shareholders--(1) out of its earnings and profits accumulated
after February 28, 1913, or (2) out of its earnings and profits
of the taxable year”.13 It is not necessary that the corporation
13Petitioners have failed to prove that there was not
sufficient accumulated or current earnings and profits to support
the deficiency determined in respondent’s notices of deficiency.
(continued...)
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