- 88 -
at 565; Shedd v. Commissioner, supra; Davis v. Commissioner,
supra. According to respondent, because Mr. Menard was the
president and sole shareholder of TMI, he obtained indirect
control over the cash that Menards paid to TMI’s vendors. We
agree with respondent. See Shedd v. Commissioner, supra.
B. The Subjective Primary Purpose Test
The subjective primary purpose test helps distinguish
related corporations’ regular business transactions from
transfers intended primarily to benefit the common shareholder.
Sammons v. Commissioner, supra at 451; Shedd v. Commissioner,
supra. Although some business justification may exist for the
property transfer, if the primary or dominant motivation was to
benefit the common shareholder, and the shareholder received a
direct and tangible benefit, the distribution is a constructive
dividend. See Rapid Elec. Co. v. Commissioner, supra at 239;
Chan v. Commissioner, T.C. Memo. 1997-154; Davis v. Commissioner,
supra; see also Broadview Lumber Co. v. United States, 561 F.2d
698, 704 (7th Cir. 1977) (citing Wilkinson v. Commissioner, 29
T.C. 421 (1957)). Mere incidental or derivative benefits to the
common shareholder will not result in constructive dividend
treatment. Shedd v. Commissioner, supra. “However, where a
corporation’s distribution serves no legitimate corporate
purpose, it must be treated as a constructive dividend to the
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