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We disagree. A shareholder receives a constructive dividend
to the extent of the corporation’s earnings and profits if the
corporation pays a personal expense of its shareholder or the
shareholder uses corporate property for a personal purpose.3
Secs. 301(c), 316(a); Falsetti v. Commissioner, 85 T.C. 332,
356-357 (1985); Henry Schwartz Corp. v. Commissioner, 60 T.C.
728, 743-744 (1973). If the earnings and profits requirement is
met, a payment is a constructive dividend if the corporation has
conferred an economic benefit on the shareholder without
expectation of repayment. United States v. Smith, 418 F.2d 589,
593 (5th Cir. 1969); Truesdell v. Commissioner, 89 T.C. 1280,
1295 (1987). Petitioners economically benefited from InsurMark’s
payment of the seat license fee in 1999 because they acquired,
without cost to themselves, the permanent seat license. The fact
that the football team and the stadium did not exist in 1999 did
not prevent the seat license from conferring an economic benefit
on petitioners; i.e., the right to buy season tickets when the
Houston Texans began playing football games.
Petitioner, not InsurMark, had the exclusive right to use
the seat license. The permanent seat license agreement was
between the Harris County-Houston Sports Authority and
petitioner. He could not transfer the license, other than to an
3 Petitioners do not contend that InsurMark’s earnings and
profits were less than the amount of constructive dividends
respondent determined.
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