Daniel L. Reeves - Page 6

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          an appeal of this case would lie, for the value of the personal             
          use of corporate property to be treated as a constructive                   
          dividend, the expenses must:  (1) Be nondeductible by the                   
          corporation; and (2) represent some economic gain or benefit to             
          the shareholder.  Palo Alto Town & Country Village, Inc. v.                 
          Commissioner, 565 F.2d 1388, 1391 (9th Cir. 1977) (the Tax Court            
          must find appropriate facts in the record to support a                      
          determination that disallowed expenses constitute constructive              
          dividends to the taxpayer), affg. in part, revg. in part, and               
          remanding T.C. Memo. 1973-223.  A corporation’s inability to                
          substantiate a deduction, without more, is not grounds for                  
          treating corporate expenditures as constructive dividends to the            
          individual.  Erickson v. Commissioner, 598 F.2d 525, 531 (9th               
          Cir. 1979), affg. in part and revg. in part T.C. Memo. 1976-147;            
          Palo Alto Town & Country Village, Inc. v. Commissioner, supra at            
          1391; Nicholls, North, Buse Co. v. Commissioner, 56 T.C. 1225,              
          1238-1239 (1971); Ashby v. Commissioner, 50 T.C. 409, 417-418               
          (1968).  Petitioner has the burden of proving respondent’s                  
          determinations are incorrect.  See Rule 142(a).                             
               This Court found in Vitamin Village, Inc. v. Commissioner,             
          T.C. Memo. 2007-272, that VVI was not entitled to claim                     
          depreciation deductions for the costs incurred in constructing              
          the floating structures because it failed to substantiate its               
          business use of the structures in its FYE June 30, 1995 and 1996.           

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