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benefitted shareholder.” Id.; see also United States v. Mew, 923
F.2d 67, 68 (7th Cir. 1991).
Respondent contends that Menards’s primary reason for paying
the excess TMI expenses was to benefit Mr. Menard through his
common ownership of Menards and TMI. Without Menards’s payment
of the excess TMI expenses, respondent asserts, Mr. Menard would
have had to contribute additional capital to TMI in order to pay
TMI’s vendors. Furthermore, respondent argues, the record
contains no evidence that Menards’s payment of the excess TMI
expenses constituted some other legitimate business transaction,
such as a loan.
In contrast, petitioners contend that the primary purpose
behind Menards’s payment of the excess TMI expenses was to
benefit Menards. Pointing to TMI’s reported 1998 taxable income
of $5,268,279, petitioners dispute respondent’s contention that
without Menards’s payments, Mr. Menard would have had to
contribute additional capital to TMI. Petitioners also emphasize
that Mr. Menard was not personally obligated to pay the excess
TMI expenses and did not otherwise directly benefit from the
payments.
In applying the subjective test, we first examine the
business purpose for Menards’s payment of the excess TMI
expenses. We held, supra, that the excess TMI expenses were not
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