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of the excess rents that ERG paid. [Benson v.
Commissioner, supra].
We found that the Lowell rent payments constituted
constructive dividends to the Bensons because ERG made payments
that it had no contractual obligation to make. We further found
that the payment of “rents” by ERG constituted constructive
dividends to the Bensons. The returns of NPI do not provide any
clues that suggest that ERG’s payments for the Lowell plant
exceeded ERG’s legal obligation to make those payments. These
disclosures did not adequately reveal the nature of these
transfers. Therefore, we hold that the Bensons failed to
disclose the constructive dividends received in the form of
purported rent payments for the Lowell plant.
While the returns of NPI disclosed the receipt of rent for
the Stanford plant, these disclosures were misleading because
they did not inform respondent that the payments exceeded ERG’s
contractual rent obligation. In Benson v. Commissioner, supra,
we stated:
The maximum monthly lease amount listed in the
unbundling agreement apparently reflected the product
of an arm’s-length negotiation between the two warring
brothers. Under these circumstances, this is the best
indication of the intent of the parties and the value
of the use of the property at that time. * * * [Fn.
ref. omitted.]
The actual payments exceeded the monthly lease payments as agreed
upon in the unbundling agreement. We think that the disclosure
of the rental payments is misleading because an examiner would
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