- 18 -
there is inadequate evidence in the record to support
petitioners’ contentions and calculations. The ledger is
unreliable for the reasons previously indicated. Raising the
issue of the proper calculation of earnings and profits for the
first time on brief has deprived respondent of the opportunity to
consider the issue and to examine and/or produce relevant
evidence. Therefore, we shall not consider petitioners’ earnings
and profits argument.
Charitable Contributions
Respondent disallowed the $4,120 payment to the Wrights’
church directly and the $1,276 payment for the benefit of the
church’s youth group that were initially claimed as business
expenses of the corporation, characterized the amounts as
constructive dividends to Mr. Wright, and now proposes to treat
the amounts as charitable contributions deductible on the
Wrights’ Federal tax return for 2001.
When a corporation pays the personal expenses of a
shareholder without expectation of repayment, it may make a
constructive dividend distribution taxable to the shareholder.
Magnon v. Commissioner, 73 T.C. 980, 993-994 (1980). Whether a
constructive dividend exists turns on whether the distribution
was primarily for the benefit of the shareholder. Hood v.
Commissioner, 115 T.C. 172, 179-180 (2000). Mr. Wright testified
at trial that he was personally involved as a counselor in his
Page: Previous 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 NextLast modified: May 25, 2011