- 16 -
T.C. 387, 395 (1955); Thielking v. Commissioner, T.C. Memo 1987-
227, affd. without published opinion 855 F.2d 856 (8th Cir.
1988). RAF cites Murphy v. Country House Inc., 349 N.W.2d 289
(Minn. Ct. App. 1984), for its assertion that Minnesota law
prohibits disproportionate constructive dividends. However, that
case held that bonuses paid to shareholder-employees constituted
disproportionate dividends and that the shareholder who was not
paid was entitled to his share of the dividend. Id. at 293. We
conclude that RAF’s payments of the charges at issue were
constructive dividends to Mr. Lenzen as a shareholder of RAF.
III. The Lenzens’ Unreported Gambling Income
The Lenzens admit that they received $13,619 of unreported
gambling income in 1999. They claim that they suffered an equal
amount of unreported gambling losses and are not liable for
income tax on the additional gambling winnings. The Lenzens did
not present at trial any records of the additional winnings or
losses.
Section 165(d) allows a deduction for gambling losses only
to the extent of gambling winnings. The Lenzens have the burden
of proving that their alleged gambling losses were in fact
sustained. See Green v. Commissioner, 66 T.C. 538, 544 (1976).
Section 6001 and the regulations thereunder require taxpayers to
keep permanent records sufficient to substantiate the amounts of
gross income, deductions, and credits shown on their income tax
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