- 5 -
times a year. Neither petitioner nor VVI kept a log of the use
of the floating structures.
In 2002, petitioner sold his residence in Newberg, Oregon,
as part of a bankruptcy sale. As part of the sale, VVI sold the
floating structures to petitioner’s wife’s company, Royal Sun
Properties, L.L.C., for $100,000 with $55,000 paid as a
downpayment.6
OPINION
Respondent contends petitioner was the primary beneficiary
of the floating structures and VVI received only a slight benefit
from its use of the property. As a result, VVI’s expenditure of
$185,327 to construct the floating structures constituted a
constructive dividend to petitioner.
When corporate property that serves no legitimate corporate
purpose is used by a shareholder for personal purposes, the value
of that property is includable in the shareholder’s income as a
constructive dividend to the extent of the corporation’s earnings
and profits.7 Falsetti v. Commissioner, 85 T.C. 332, 356 (1985).
According to the Court of Appeals for the Ninth Circuit, to which
6 As of the date of trial, Royal Sun Properties, L.L.C.,
still owed VVI $45,000.
7 Where substantial business and personal uses of the
property exist, the expenses may be allocated. Intl. Artists,
Ltd. v. Commissioner, 55 T.C. 94, 105 (1970). Such allocation
depends upon a comparison of the personal and business
considerations. Id.
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