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intend a dividend, or that the distribution be termed a dividend
or recorded as such. Dolese v. United States, 605 F.2d 1146,
1152 (10th Cir. 1979). Thus, dividends may be either formally
declared, or they may be “constructive”. Ireland v. United
States, supra at 735.
A constructive dividend is paid when a corporation confers
an economic benefit on a shareholder without expectation of
repayment. Wortham Mach. Co. v. United States, 521 F.2d 160, 164
(10th Cir. 1975). That shareholder, for the taxable years before
us, is Mr. Cordes.
Although Mrs. Cordes, Eddy Ben Cordes, Jean Ann Richard, and
John Cordes, in some proportion, held legal title to all of the
outstanding shares of stock in CFC and ECI throughout the taxable
years at issue, “record ownership of stock, standing alone, is
not determinative of who is required to include any dividends
attributable to such stock in gross income. Rather, beneficial
ownership is the controlling factor.” Cordes v. Commissioner,
T.C. Memo. 1994-377 (citing Walker v. Commissioner, 544 F.2d 419
13(...continued)
Rule 142(a). The Internal Revenue Service Restructuring & Reform
Act of 1998, Pub. L. 105-206, sec. 3001, 112 Stat. 685, 726,
added sec. 7491(a), which is applicable to court proceedings
arising in connection with examinations commencing after July 22,
1998. Under sec. 7491, Congress requires the burden of proof to
be placed on the Commissioner, subject to certain limitations,
where a taxpayer introduces credible evidence with respect to
factual issues relevant to ascertaining the taxpayer’s liability
for tax. In the instant case, petitioners have not raised the
application of this provision. Further, the record does not
indicate that the Commissioner’s examinations commenced after
July 22, 1998.
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