-18-
mean that his medical practice, which petitioner represented to
the public and to the Commissioner as a corporation named “David
Dung Le, M.D., Inc.”, may escape Federal taxation as a
corporation.12
B. Constructive Distributions
Absent a provision to the contrary, funds which a
shareholder diverts from a corporation are generally includable
in the shareholder’s gross income under section 61(a) to the
extent that the shareholder has dominion and control over them.
See also Commissioner v. Glenshaw Glass Co., 348 U.S. 426, 431
(1955). One example of a contrary provision is section 301 where
Congress has provided that funds (or any other property)
distributed by a corporation to a shareholder with respect to his
or her stock are to be taxed under the provisions of section
301(c). Under section 301(c), a constructive distribution is
12 Petitioners’ argument that DDL never existed is even more
audacious given that DDL attempted to litigate in this case the
merits of DDL’s liabilities and thereafter appealed to the Court
of Appeals for the Ninth Circuit our decision that DDL lacked
capacity to litigate by virtue of the fact that it was a
corporation with suspended powers. In light of the record as a
whole, including especially the Les’ plea agreements and DDL’s
filing of corporate income tax returns, we consider petitioners’
argument herein that petitioner did not operate his medical
practice through a corporation known as “David Dung Le, M.D.,
Inc.” to be frivolous. We also consider that it appears to have
been unreasonable for Mr. Hagendorf to have refused to stipulate
on behalf of his client to certain undisputed facts as to the
incorporation of petitioner’s medical practice, facts, we note,
which petitioner later testified at trial without contradiction
to be true.
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