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further support in the fact that the record strongly suggests,
and respondent has certainly failed to show otherwise, that the
amounts in issue were previously subject to tax at the corporate
level. IL NA Tours reported gross receipts exceeding $34 million
on its 1987 return. Respondent concedes that the losses in
excess of $6 million in the corporate investment accounts
occasioned by the 1987 stock market crash were reported on that
return. IL NA Tours reported gross receipts exceeding $9 million
on its 1988 return, a dropoff that is consistent with the
disruption in its sale of Northwest tickets in that year. These
gross receipts figures suggest that the Northwest ticket sales
that were the source of petitioner’s diversions were reported at
the corporate level.
In Truesdell, we quoted with approval the following
observation of the Court of Appeals for the Eighth Circuit: “We
believe that the only way that the diverted income already taxed
to the corporation can be taxed to the individual taxpayers is by
the treatment of such diversions as dividends and corporate
distributions.” Truesdell v. Commissioner, 89 T.C. at 1299
(quoting Simon v. Commissioner, 248 F.2d 869, 876-877 (8th Cir.
1957)). Because the record strongly suggests that the amounts
petitioner diverted from his corporations were subject to tax at
the corporate level, we are quite reluctant to find them taxable
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