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Commissioner, 28 T.C. 1100, 1115 (1957), affd. per curiam 262
F.2d 150 (9th Cir. 1958).
To constitute a constructive dividend a corporate
distribution to a shareholder must be both nondeductible to the
corporation and must confer some economic benefit or gain to the
shareholder. Palo Alto Town & Country Vill., Inc. v.
Commissioner, 565 F.2d 1388, 1391 (9th Cir. 1977), affg. in part,
revg. and remanding in part T.C. Memo. 1973-223; Falsetti v.
Commissioner, supra at 357. Not every corporate expenditure
conferring an economic benefit to the shareholder is a
constructive dividend. The deciding factor is whether the
expenditure was primarily for the shareholder’s benefit and there
was no expectation of repayment. Crosby v. United States, 496
F.2d 1384, 1388-1389 (5th Cir. 1974); Noble v. Commissioner, 368
F.2d 439 (9th Cir. 1966), affg. T.C. Memo. 1965-84.
Petitioners rely on the adoption of a corporate resolution
dated January 15, 1996, stating that the board intends any amount
of expenses which are disallowed by the Internal Revenue Service
to be treated as repayment of shareholder loans. Petitioners’
reliance on the corporate resolution is misplaced. The
resolution was adopted after the 1995 tax year and was intended
to recharacterize payments already made. The fact that there is
no evidence of loan treatment on PPP’s books vitiates the
resolution. The resolution is merely an after-the-fact statement
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