- 28 -
provided, constituted constructive dividend income to
shareholder). Because petitioners failed to show Mr. Cordes
received no personal benefit from these transfers, we hold Mr.
Cordes received constructive dividends in 1994 and 1995 with
respect to these items.
3. Bargain Sale of Notes
Respondent determined that CFC sold 584 notes to Mr. Cordes
in each of 1994 and 1995 at prices below their fair market value
and that the discount at which CFC sold the notes constitutes
constructive dividends from CFC to CFC’s shareholder(s).
Petitioners contend CFC owned the 1994 and 1995 notes at all
times and that because Mr. Cordes did not purchase the 1994 and
1995 notes (in a bargain sale or otherwise), CFC conferred no
economic benefit on its shareholder(s). We conclude below that
Mr. Cordes did in fact purchase the 1994 and 1995 notes at prices
below fair market value and that Mr. Cordes, as beneficial owner
of CFC, received constructive dividends in amounts equal to the
discounts received.
In 1994, Mr. Cordes transferred $200,000 of his personal
savings to CFC. Contemporaneously, CFC removed a number of notes
from its books, and Mr. Cordes recorded those notes on his books.
Mr. Cordes contends that his transfer of $200,000 to CFC was
merely coincident with CFC’s reorganization of its records. Mr.
Cordes, however, offered no evidence that the $200,000 was
treated as a capital contribution or loan to CFC, rather than as
funds used to purchase the notes.
Page: Previous 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 NextLast modified: May 25, 2011