T.C. Memo. 2003-90
UNITED STATES TAX COURT
JERRY S. PAYNE, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 12473-99. Filed March 27, 2003.
Prior to and during the audit years (1989 and
1990), P practiced law in Houston, Texas. He was
also involved in the real estate business through his
investment in P&P, Inc. Prior to 1989, P provided
legal services to X, Inc., which operated a topless
dance club in Houston, and to H, a 50-percent
shareholder of X, Inc., and manager of the club. In
payment of the overdue fees for those services, P
acquired most of the assets and all of the stock of X,
Inc., and he assumed management control of the club. P
leased the assets back to X, Inc., for use by the club.
In November 1990, after securing a permit to continue
to conduct a sexually oriented business at the club’s
premises and a mixed beverage permit (liquor license)
for Y, Inc. (also wholly owned by P), at such premises,
P caused the club’s operation and assets (including the
leased assets) to be transferred from X, Inc., to Y,
Inc. R determined that (1) “withdrawal authorizations”
signed by P, in 1989 and 1990, for various sums of
money were disguised dividends to P rather than
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