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Menards’s ordinary and necessary business expenses. The record
contains no other credible explanation for Menards’s payments.
We conclude, therefore, that Menards’s payment of the excess TMI
expenses was intended to benefit Mr. Menard as the sole
shareholder of TMI.
In addition, the record indicates that Mr. Menard directly
and tangibly benefited from Menards’s payment of the excess TMI
expenses. Although Mr. Menard was not personally liable for the
expenses, Menards’s payments provided TMI additional capital,72
which obviated the need for Mr. Menard to contribute from his
personal resources and enhanced the value of Mr. Menard’s 100-
percent ownership interest. See Lohrke v. Commissioner, 48 T.C.
at 689 (“the payment of a corporation’s expenses is one way to
provide capital”); Davis v. Commissioner, supra.
C. Conclusion
Menards’s payment of the excess TMI expenses resulted in a
constructive dividend from Menards to Mr. Menard. As TMI’s
president and sole shareholder, Mr. Menard exercised indirect
control over the payments. Moreover, the payments lacked a
legitimate business justification and directly benefited Mr.
72At trial neither party introduced specific evidence on the
adequacy of TMI’s capitalization. Accordingly, we decline to
decide whether TMI required additional capital.
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