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e. Summary of Food and Lodging Expenses
To summarize, Hillside Dairy may deduct the following
expenses for the years at issue:
11/30/95 11/30/96 11/30/97
Property tax--house $523 $400 $388
Property insurance--house -- 120 132
Depreciation--house 1,667 1,667 1,667
Total 2,190 2,187 2,187
Hillside Dairy may not deduct the following food and lodging
expenses:
11/30/95 11/30/96 11/30/97
Food for employees $6,724 $8,760 $8,161
Meals & entertainment 994 1,338 1,369
Utilities--house 2,567 2,439 2,557
Total 10,285 12,537 12,087
3. Inclusion of Payments in the Schmidts’ Gross Income
When a corporation makes an expenditure that primarily
benefits the corporation’s shareholders, the amount of the
expenditure may be taxed to the shareholders as a constructive
dividend. Hood v. Commissioner, 115 T.C. 172 (2000); Magnon v.
Commissioner, 73 T.C. 980, 993-994 (1980); Am. Insulation Corp.
v. Commissioner, T.C. Memo. 1985-436. We have found that
expenses for food for employees, meals and entertainment, and
utilities paid by Hillside Dairy are the Schmidts’ expenses.
Petitioners contend that the payments are not constructive
dividends because Mr. Schmidt was required to repay any amounts
that Hillside Dairy could not deduct for Federal income tax
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