- 84 -
unreported income in that amount as a result of diversions from
his corporations.
The amounts we conclude petitioner diverted from his
corporations to personal use in 1988 are:
Description Amount
Kodak stock proceeds $3,280
Pan Am stock proceeds 116,600
Sam Han account 232,872
Total 352,752
The question remains whether the amounts we have concluded are
unreported income of petitioner are taxable as ordinary income
under section 61(a) or as constructive dividends under section
301(c). Respondent, relying principally on Leaf v. Commissioner,
33 T.C. at 1095, contends that the amounts are taxable under
section 61(a) because they were wrongfully appropriated in a
fraud upon a third party dealing with the corporation.
Petitioner, citing our opinion in Truesdell v. Commissioner, 89
T.C. 1280 (1987), contends that section 301(c) governs the
taxation of any amounts that we conclude were transferred from IL
NA Tours to him. For the reasons outlined below, we agree with
petitioner.
In Leaf, we held that amounts that had been taken by a
shareholder from his wholly owned corporation for his own use
(and not returned within the year of the taking) at a time when
Page: Previous 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 NextLast modified: May 25, 2011