- 45 -
1972), affg. in part and revg. in part on another ground T.C.
Memo. 1971-145.
“Corporate expenditures constitute constructive dividends
only if 1) the expenditures do not give rise to a deduction on
behalf of the corporation, and 2) the expenditures create
‘economic gain, benefit, or income to the owner-taxpayer.’” P.R.
Farms, Inc. v. Commissioner, 820 F.2d 1084, 1088 (9th Cir. 1987)
(quoting Meridian Wood Prods. Co. v. United States, 725 F.2d
1183, 1191 (9th Cir. 1984)), affg. T.C. Memo. 1984-549. “The
crucial concept in a finding that there is a constructive
dividend is that the corporation has conferred a benefit on the
shareholder in order to distribute available earnings and profits
without expectation of repayment.”43 Truesdell v. Commissioner,
supra at 1295 (citing Noble v. Commissioner, supra at 443). A
“constructive dividend” is “simply a corporate disbursement that
is a dividend in the contemplation of law though not called such
43 “To constitute a distribution taxable as
a dividend, the benefit received by the
shareholder need not be considered as a
dividend either by the corporation or its
shareholders, declared by the board of
directors, nor other formalities of a
dividend declaration need be observed, if on
all the evidence there is a distribution of
available earnings or profits under a claim
of right or without any expectation of
repayment.” * * *
Noble v. Commissioner, 368 F.2d 439, 443 (9th Cir. 1966), affg.
T.C. Memo. 1965-84 (quoting Clark v. Commissioner, 266 F.2d 698,
711 (9th Cir. 1959)).
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