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This fact alone is not sufficient grounds for treating the costs
of building the floating structures as constructive dividends to
petitioner. See Nicholls, North, Buse Co. v. Commissioner, supra
at 1238-1239.
In support of his contention respondent argues that the
floating structures conferred an economic gain and benefit upon
petitioner because they “reflected a positive light upon
petitioner’s standing in the community and his wealth”, they
provided “prestige and [a] positive, youthful image”, and they
provided security and covered moorage for his boat and jet skis,
and petitioner used the property approximately 10 times a year
for personal purposes.8
The record does not indicate petitioner personally received
an economic gain or benefit from the floating structures in 1995.
They were under construction in 1995 and were not available for
use until May 28, 1996. Moreover, title to the floating
structures was in VVI’s name, and when petitioner sold his
residence as part of his bankruptcy in 2002, VVI was compensated
for the accompanying sale of the floating structures.
8 On brief, respondent additionally argued that petitioner
economically benefited when he used the floating structures to
justify draws from VVI of $1,000 per month pursuant to the lease
agreement between VVI and petitioner. However, respondent did
not assert that the lease agreement between VVI and petitioner
lacked corporate purpose, that VVI was not entitled to deduct its
leasehold payments, or that petitioner did not report VVI’s
leasehold payments as income.
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Last modified: November 10, 2007