William H. Breucher III - Page 11

                                       - 10 -                                         
          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.”  Truesdell v. Commissioner,              
          supra at 1295 (citing Noble v. Commissioner, supra at 443); see             
          Williams v. Commissioner, 627 F.2d 1032, 1034 (10th Cir. 1980)              
          (quoting Wortham Mach. Co. v. United States, 521 F.2d 160, 164              
          (10th Cir. 1975)), affg. T.C. Memo. 1978-306.                               
               “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, supra at 443 (quoting Clark v.                       
          Commissioner, 266 F.2d 698, 711 (9th Cir. 1959)).  A                        
          “constructive dividend” is “simply a corporate disbursement that            
          is a dividend in the contemplation of law though not called such            
          by the corporation making the disbursement.”  United States v.              
          Mews, 923 F.2d 67, 68 (7th Cir. 1991).  Furthermore, to be a                
          constructive dividend to a shareholder, the corporation need not            
          pay it directly to the shareholder.  Id.                                    
               The first consideration in determining whether a                       
          shareholder’s withdrawals or advances from a corporation                    
          constitute loans or constructive dividends is whether, at the               

Page:  Previous  1  2  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  Next

Last modified: May 25, 2011