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L & L MARINE SERVICE, INC. AND SUBSIDIARIES, Petitioners
v. COMMISSIONER OF INTERNAL REVENUE, Respondent; ROBERT J. AND KATHERINE S. LESHE, Petitionersv. COMMISSIONER OF INTERNAL REVENUE, RespondentL & L Marine Service, Inc. v. CommissionerDocket Nos. 25991-82; 25992-82.United States Tax Court T.C. Memo 1987-428; 1987 Tax Ct. Memo LEXIS 425; 54 T.C.M. (CCH) 312; T.C.M. (RIA) 87428;August 26, 1987. William J. Falk Mary Helen Roth ,Steven W. LaBounty, for the respondent.KORNERMEMORANDUM FINDINGS OF FACT AND OPINION
Korner,
Judge: In these consolidated cases, respondent determined deficiencies in and additions to petitioners' Federal income taxes as follows:
*428L & L Marine Service, Inc. and Subsidiaries Year Addition to Tax Ended Deficiency Sec. 6651(a) Sec. 6653(a) June 30, 1977 $ 1,432.44 $ -- June 30, 1978 148,853.81 -- 7,442.69 *432 L & L Marine Service, Inc. ("L & L") is the parent of the L & L Group. During the years at issue, it owned 100 percent of the stock of General Marine Inc. ("General Marine"), Inland River Transportation Corp. ("Inland"), Weaver Shipyard & Drydock Inc. ("Weaver"), and Marine Power Inc.General Marine owned 100 percent of the stock of Contratistas En Embarcaciones de Puerto Rico.
Leshe and George P. Jacobsen were the only shareholders of L & L. Their respective shareholdings were as follows:
Percentage Ownership Date Leshe Jacobson June 30, 1976 90 10 June 30, 1977 50 50 June 30, 1978 50 50 Leshe was L & L's president, and Jacobson was L & L's vice-president.
L & L, General Marine, and Inland had accumulated earnings and profits in approximately the following amounts on the dates indicated:
Accumulated Earnings and Profits Date L & L Inland General Marine June 30, 1976 $ 500,679 ($ 596,000) $ 1,206,350 June 30, 1977 1,191,861 (1,508,520) 1,468,829 June 30, 1978 1,833,133 (2,353,525) 1,806,003 Leshe and Katherine S. Leshe resided in St. Louis, Missouri, when they filed their petition in this case. *433 They timely filed joint Federal income tax returns for 1974, 1976, and 1977. They filed their joint Federal income tax return for 1975 on July 28, 1976. The due date of the return was July 12, 1976. The Leshes concede that their failure to timely file the return was not due to reasonable cause.
Leshe organized the L & L Group in 1969. Its purpose was originally limited to operating tugs and barges on inland waterways of the United States. It later expanded the geographical scope of its operations and now operates tugs and barges all over the United States and throughout the Caribbean.
CAPITAL EXPENSE ISSUE FINDINGS OF FACT
Prior to and during 1976, the L & L Group operated a fleet of barges. It used the barges in both fresh and salt water. The barges were used to transport, among other things, pitch, coke, carbon electrodes, fire brick, and soda ash. During its tax year ended June 30, 1976, the L & L Group had $ 1,313,451.07 of work performed on its barges. It deducted a total of $ 436,232.71 of the cost of the barge repairs including $ 371,261.32 from six barges referred to as P1 through P6. The year the L & L Group acquired barges P1 through P6, its costs, the*434 amounts of barge repair expenses claimed and the amounts capitalized for each for the year ended June 30, 1976, are set forth below:
Year Repairs Amount Barge Acquired Cost Deducted Capitalized P1 1969 $ 93,151.27 $ 90,532.63 $ -0- P2 1969 94,159.31 33,853.06 192,000.00 P3 1969 78,412,75 139,246.84 -0- P4 1969 89,939.00 -0- P5 1969 88,766.10 121,043.82 -0- P6 1969 94,906.02 1,084.97 -0- $ 539,334.45 $ 371,261.32 $ 192,000.00 Each of the barges P1 through P6 had been fully depreciated by June 30, 1975.
For the purpose of preparing a certified financial statement for the L & L Group's fiscal year ended June 30, 1977, the accounting firm of Peat, Marwick, Mitchell & Co. ("Peat Marwick") audited the books and records of the L & L Group. During the course of that audit, Peat Marwick determined that the Group was required to capitalize*435 $ 285,564.11 of the repair costs for barges P1 through P6 that it had expensed for the year ended June 30, 1976. *436 expense within the meaning of section 263. Petitioners contend that the $ 285,563.11 is fully deductible as an ordinary and necessary business expense under section 162. *437 As a result of his determination that $ 285,563.11 of the Group's barge repair expense was a capital expense, respondent determined that the L & L Group's taxable income for 1976 should be increased by that amount, and that the amount of intercompany profits reported by the Group must be adjusted as follows:
Year Ended Adjustment June 30, 1976 ($ 83,635.10) June 30, 1977 (7,631.43) June 30, 1978 50,990.63 The $ 285,563.11 of barge repair expenses at issue was for ordinary and necessary repair and maintenance work, which neither enhanced the value of the barges, nor prolonged their useful lives.
OPINION
The issue for our decision is whether respondent erred in determining that $ 285,563.11 that the L & L Group expensed for the year ended June 30, 1976, for work done on its barges constituted capital expenses. Our determination of that issue will resolve whether respondent properly adjusted the Group's intercompany profits.
Incidental repairs and maintenance expenses are deductible if they "neither materially add to the value of the property nor appreciably prolong its life, but keep it in an ordinarily efficient operating condition" provided the expense*438 is not added to the basis of the item repaired.
Secs. 1.162-4 ,1.263(a)-1(b), Income Tax Regs. Repairs in the nature of replacements are required to be capitalized to the extent that they both "arrest deteriorationand appreciably prolong the life of the property."Sec. 1.162-4, Income Tax Regs. (Emphasis added.) The test to be applied in distinguishing between the two categories of repairs is "whether the expenditure materially enhances the value, use, life expectancy, strength, or capacity as compared with the status of the asset prior to the condition necessitating the expenditure."Plainfield-Union Water Co. v. Commissioner, 39 T.C. 333">39 T.C. 333Libby & Blouin, Ltd. v. Commissioner, 4 B.T.A. 910">4 B.T.A. 910P. Dougherty Co. v. Commissioner, 159 F.2d 269">159 F.2d 2695 T.C. 791">5 T.C. 791 (1945), cert. denied331 U.S. 838">331 U.S. 838 (1947).In this case, Leshe testified at length regarding the damage caused to the barges by the punishing use to which they were put. He also described in detail the stringent standards the barges were required to meet in periodic tests in order to qualify to operate. His testimony was corroborated by Fontain M. Johnson, a professional engineer with a degree in Naval Architecture and Marine Engineering. Johnson was employed by the L & L Group during 1976 and is familiar with the Group's barge operation including the barges themselves, the types of cargo they carried, the conditions under which the barges were used, and the repairs and maintenance that had been performed on the barges. Leshe and Johnson agreed that the work performed on the barges was necessary to enable the barges to continue to qualify for sea duty, and that the repairs did not appreciably prolong their useful lives or enhance their value. We found their testimony in this regard to be credible.
Respondent presented no expert testimony relevant to the repair expenses and instead appears to rely on the fact that the Group's accountants*440 required the expenses to be capitalized to support his position that expenses are not deductible. We have no evidence before us why the accountants required the expenses to be capitalized, and accept Leshe's explanation that financial exigencies forced the L & L Group to accede to the accountants' demands despite being convinced that the expenses were properly deductible.
We conclude that the evidence establishes that the repair expenses at issue were incidental to the normal operation of the barges as they were incurred to replace worn out components and keep the barges in ordinarily efficient operating condition. They did not materially add to the value of the barges or prolong their lives as compared to the value and life expectancy of the barges prior to the use that necessitated the repairs. We accordingly hold that the $ 285,563.11 of repair costs are currently deductible as ordinary and necessary business expenses.
SALVAGE VALUE FACTS
The L & L Group owned a number of towboats during the years at issue and used them to tow barges. The towboats included the Ocean Star and the Ocean Voyager. The Group also owned a Saberliner aircraft. The dates the Group acquired*441 the towboats and aircraft, its cost bases in them, their useful lives, and their salvage values as determined by respondent and claimed by the Group, are set forth below:
Acquisition Useful Salvage Value Per Asset Date Basis Life Respondent L & L Ocean Star 4/12/76 $ 2,941,245.41 20 yrs. $ 600,000 $ 301,390.20 Ocean Voyager 6/11/76 2,956,804.80 20 yrs. 600,000 316,944.46 Saberliner 7/06/77 588,237.13 7 yrs. 350,000 58,876.53 When acquired, the Ocean Star had a salvage value of $ 301,390.20, and the Ocean Voyager had a salvage value of $ 316,944.46.
OPINION
The issue for decision is whether the two towboats and the Saberliner aircraft have lower salvage values than was determined by respondent. Respondent's determination decreases the L & L Group's allowable depreciation deductions during the years at issue.
Salvage value is defined as:
the amount (determined at the time of acquisition) which is estimated will be realizable upon sale or other disposition of an asset when it is no longer useful in the taxpayer's trade or business or in the production of his income and is to be retired from service by the taxpayer. *442 * * *
Sec. 1.167(a)-1(c)(1), Income Tax Regs. The same regulation provides further that:The time at which an asset is retired from service may vary according to the policy of the taxpayer. If the taxpayer's policy is to dispose of assets which are still in good operating condition, the salvage value may represent a relatively large proportion of the original basis of the asset. However, if the taxpayer customarily uses an asset until its inherent useful life has been substantially exhausted, salvage value may represent no more than junk value. * * *
See alsoMassey Motors, Inc. v. United States, 346 U.S. 92">346 U.S. 92The salvage value of an asset is a factual question, and petitioners have the burden of proving that the salvage values determined by respondent in his notice of deficiency are erroneous.
S. & B. Realty Co. v. Commissioner, 54 T.C. 863">54 T.C. 863The evidence regarding the salvage values of the towboats consists of the trial testimony of Leshe and Fontain Johnson. Both testified to the effect that the salvage values determined by respondent for the towboats were too high. Leshe testified that he deliberately*443 selected salvage values for the towboats that were on the high end of the proper range in order to reduce the L & L Group's annual depreciation expenses. Johnson's testimony supports Leshe's testimony that the salvage values reported by the L & L Group were at least as great as was proper. Johnson testified that the salvage values reported by the Group were probably higher than appropriate. He explained that the salvage values of 20 year old towboats are equivalent to their scrap values and that the salvage values used by the Group were considerably higher than scrap values. *444 hold, however, that L & L has failed to prove that respondent erred in determining the salvage value of the Saberliner. The only evidence in the record regarding the salvage value of the Saberliner is Leshe's testimony that he believes the salvage value reported by L & L is appropriate. Although we do not question Leshe's honesty, we simply accord his opinion little weight as he failed to demonstrate any experience that would qualify him to determine the Saberliner's salvage value.
CORPORATE AUTOMOBILES FACTS
The L & L Group owned a number of automobiles during the years at issue. The months Group members acquired them, their cost bases, their salvage values, and their useful lives, are set forth below:
Month Cost Salvage Useful Auto Acquired Basis Value Life Owned by L & L 1973 Buick $ 5,938.00 $ 1,000 3 yrs. 1976 Buick 3/76 7,599.00 1,600 3 yrs. Owned by Inland 1973 Mercedes 8/73 $ 10,058.15 $ 4,000 3 yrs. 1975 Cadillac 9/74 9,401.61 3,700 3 yrs. 1976 Mercedes 7/76 23,726.08 9,500 3 yrs. 1978 Chrysler 6/78 8,739.83 3,500 3 yrs. *445 If the L & L Group had used the automobiles exclusively for business, it would have been entitled to the following depreciation deductions during the years at issue:
Year ended June 30 Automobile 1976 1977 1978 1973 Buick $ 1,646.00 $ 269.00 $ -- 1976 Buick 499.92 1,999.67 1,999.67 1973 Mercedes 2,019.38 336.61 -- 1975 Cadillac 1,900.54 1,900.54 475.11 1976 Mercedes -- 4,742.03 4,742.03 1978 Chrysler -- -- 145.55 Total $ 6,065.84 $ 9,247.85 $ 7,362.36 No records were kept of the business use of the automobiles. Petitioners and their children used the automobiles for personal purposes to some extent.
In his notice of deficiency to the L & L Group, respondent disallowed all the depreciation deductions claimed during the years at issue for each of the six automobiles. Respondent based his determination that the L & L Group is not entitled to depreciation deductions for the automobiles on the grounds that they were not used for business purposes. *446 Respondent determined in his notice of deficiency to the Leshe's that they received the following constructive dividends from their personal use of the L & L Group's automobiles:
Year Automobile 1975 1976 1977 1973 Buick $ 1,800 $ 450 $ -- 1975 Cadillac 2,940 980 -- 1976 Buick 2,760 2,760 1,150 Total $ 7,500 $ 4,190 $ 1,150 OPINION
Depreciation Deduction To establish that it is entitled to depreciation deductions for the six automobiles the L & L Group must prove that it used them, at least partially, for business. Sec. 167(a);
Henry Schwartz Corp. v. Commissioner, 60 T.C. 728">60 T.C. 728Our inquiry does not end there, however. If an automobile is used partly for business purposes and partly for personal*447 purposes, as were the automobiles in issue, depreciation is deductible only to the extent of the business use.
Henry Schwartz Corp. v. Commissioner, supra ; International Artists, Ltd. v. Commissioner, 55 T.C. 94">55 T.C. 94International Artists, Ltd. v. Commissioner, supra at 104International Artists, Ltd. v. Commissioner, supra at 108Greenspon v. Commissioner, 23 T.C. 138">23 T.C. 138229 F.2d 947">229 F.2d 947 , 956 (5th Cir. 1956). Taxpayers such as petitioners who fail to keep adequate records should not be surprised if a court is reluctant to accept their testimony fully.Webb v. Commissioner, 394 F.2d 366">394 F.2d 366T.C. Memo 1966-81">T.C. Memo. 1966-81 .Leshe's testimony regarding the proportion of the automobiles' total use that was business use was imprecise. He testified that business use constituted*448 between 70 and 90 percent of the total use of each of the automobiles. He admitted that it was difficult for him to judge the proportion of business use of each of the cars, as he did not "follow around" their drivers. Although we are convinced that the automobiles were used for business purposes, we are unconvinced that Leshe's imprecise testimony establishes the amount of business use with reasonable accuracy.
Where, as here, a taxpayer demonstrates that he is entitled to a deduction but is unable to establish the exact amount of the deduction, it is our responsibility to determine the appropriate amount of the deduction.
Durkin v. Commissioner, 87 T.C. 1329">87 T.C. 1329Cohan v. Commissioner, 39 F.2d 540">39 F.2d 540Durkin v. Commissioner, supra. Constructive Dividends Taxable income includes dividends received by shareholders from corporations. Secs. 301(c)(1); 61(a)(7). When a shareholder of his family is permitted to use corporate property for personal purposes, the fair rental value of the property is includable in his income as a constructive dividend to the extent of the corporation's earnings and profits.
Commissioner v. Riss, 374 F.2d 161">374 F.2d 161Falsetti v. Commissioner, 85 T.C. 332">85 T.C. 332Respondent determined that three automobiles owned by members of the L & L Group were used entirely for personal purposes, and that Leshe received constructive dividends from the personal use. *450 those amounts below:
Year Car 1975 1976 1977 1973 Buick $ 900 $ 225 $ -- 1975 Cadillac 1,470 490 -- 1976 Buick 1,380 1,380 575 Totals $ 3,750 $ 2,095 $ 575 TAX PAYMENT DEDUCTIONS FACTS
Respondent audited the employment records of Inland for the calendar years 1973, 1974, and 1975. As a result of the audit, Inland*451 in its fiscal year 1978 was required to pay additional Federal withholding tax and Federal Insurance Contributions Act ("FICA") tax with respect to its employees as follows:
Year FICA Withholding Total 1973 $ 1,811.33 $ 837.69 $ 2,649.02 1974 4,674.27 2,433.70 7,107.97 1975 4,552.26 3,522.88 8,075.14 Total $ 11,037.86 $ 6,794.27 $ 17,832.13 The following amounts of the taxes were paid on wages received by shareholders of L & L:
FICA FICA Withholding Withholding Shareholder Year Wages Tax Wages Tax Leshe 1973 $ 0 $ 0 $ 1,589.50 $ 317.90 1974 0 0 1,677.89 335.58 1975 0 0 1,772.28 354.46 G. P. Jacobson 1973 0 0 1,733.08 346.62 1974 0 0 1,905.68 381.14 1975 0 0 2,105.68 421.14 Totals $ 0 $ 0 $ 10,784.11 $ 2,156.84 The L & L Group claimed the $ 17,832.13 as an expense for its taxable year ended June 30, 1978. Respondent disallowed $ 12,313.20 of the deduction, representing the amount Inland paid for withholding of income tax and its employees' half of the FICA tax. Inland made no attempt to collect the disallowed amounts from its employees, and did not report*452 the amounts paid as compensation to its employees. It is not the policy of the L & L Group to pay its employees' regularly-accruing share of FICA or withholding tax.
OPINION
Petitioners content that the taxes at issue are deductible under section 162(a) as ordinary and necessary business expenses, either on the grounds that they were paid as compensation for services or, alternatively, on the grounds that they constituted a legal obligation of Inland under sections 3102(b) and 3403.
Sec. 1.162-7(a), Income Tax Regs. Amounts are not deductible as compensation if they are not paid to purchase services.Sec. 1.162-7(b)(1), Income Tax Regs. In this case, there is no evidence that the taxes at issue were paid by Inland to purchase the services of its employees. Indeed, as we have found, it was not the policy of the L & L Group to pay its employees' taxes as part of their compensation. The evidence establishes*453 instead that Inland paid the taxes to respondent in satisfaction of its legal obligation under sections 3102(b) and 3403. We accordingly conclude that the payments fail to qualify to be deducted as compensation expense.Having concluded that the payments are not deductible under section 162(a) as compensation expense, we must next address the L & L Group's argument that the payments are nevertheless deductible under section 162(a) as general business expenses. The Group argues that the taxes are deductible because Inland was obligated to pay them by sections 3102(b) and 3403. We disagree.
A legal obligation to pay an expense does not, without more, make the expense deductible under section 162(a).
Interstate Transit Lines v. Commissioner, 319 U.S. 590">319 U.S. 590Welch v. Helvering, 290 U.S. 111">290 U.S. 111FACTS
The L & L Group claimed deductions for travel, entertainment, and gift expenses for its taxable years 1976, 1977, and 1978. Respondent determined in his notice of deficiency to the L & L Group that it was not entitled to deduct a portion of the claimed expenses. Respondent based his determination on the grounds that (1) the Group had not established that the disallowed amounts were ordinary and necessary business expenses or were expended for the purpose designated, and (2) the Group failed to keep the records required by section 274(d) to substantiate the deductibility of the expenses. Petitioners have conceded that the L & L Group is not entitled*455 to deduct a portion of the disallowed expenses. The respective amounts of travel, entertainment, and gift expenses claimed by the Group, disallowed by respondent, conceded by the Group as nondeductible, and remaining in dispute, are set forth below:
Year Ended June 30 1976 1977 1978 Claimed as Deductions $ 155,298.00 $ 230,436.00 $ 174,565.00 Disallowed by Respondent 46,763.75 54,732.28 75,190.45 Conceded by the Group 16,240.66 23,162.31 26,621.33 Remaining in Dispute 30,523.09 31,569.97 48,569.12 Respondent determined in his notice of deficiency to the Leshes that the following amounts deducted by the L & L Group as travel and entertainment expenses were personal expenses of Leshe, and that the amounts paid by the Group were includable in Leshe's income as constructive dividends:
Expenditures 1975 1976 1977 Cash Advances to Leshe From U.S. Companies $ 6,300.00 $ 15,241.00 $ 12,300.00 From Puerto Rican Company -- 4,917.00 2,000.00 Sunset Country Club Charges 2,902.81 4,295.59 3,225.08 Other Charges 96.20 487.45 223.35 Puerto Rico Air and Hotel -- 1,157.53 -- Total $ 9,229.01 $ 26,098.57 $ 17,748.43 *456
Respondent now concedes that the amounts referred to as Cash Advances to Leshe from Puerto Rican Company are not includable in his income as they are duplicates of amounts included in Cash Advances to Leshe from U.S. Companies.
L & L had an account at the Sunset Country Club. Leshe and his wife used the club for personal purposes, but kept no records of the personal use. The amounts referred to as Sunset Country Club charges represent L & L's payments of bills from the Sunset Country Club.
The amounts referred to as "Other Charges" include the following expenses:
Personal Expenses $ -- Miscellaneous Expenses 96.20 114.13 88.95 $ 96.20 $ 487.45 $ 223.35 The amount referred to as Puerto Rico Airfare and Hotel includes*457 Mrs. Leshe's airfare to Puerto Rico to accompany Leshe on a trip to Puerto Rico, and one-half of the couple's hotel and cash expenses there.
OPINION
Deductions Respondent's determination in his notice of deficiency that the expenses at issue are not deductible is presumed correct, and the burden of proving it incorrect rests on petitioner.
Welch v. Helvering, supra at 115Although the Group introduced both documentary and testimonial evidence that purports to substantiate the deductibility of travel and entertainment expenses, it failed to establish that those expenses had not been among those that had been allowed by respondent. Respondent allowed the bulk of the travel and entertainment expenses deducted by the L & L Group. The Group had the burden of proving that it incurred deductible expenses
in addition to those allowed by respondent, and it failed to do so. We accordingly hold that the L & L Group has failed to prove that*458 it is entitled to deduct travel and entertainment expenses in excess of those allowed by respondent.Constructive Dividends Respondent determined that the L & L Group paid personal travel and entertainment expenses incurred by Leshe and that the payments were constructive dividends to him. Leshe does not dispute that a corporation's payment of a shareholder's personal travel and entertainment expense can constitute a constructive dividend to the shareholder. See
Cirelli v. Commissioner, 82 T.C. 335">82 T.C. 335Cash Advances - Cash advances represent cash advanced to Leshe. Leshe testified that he used the advances to pay the expenses he incurred while traveling on business; and prepared a 46 page exhibit on which he attempted to reconstruct his use of the advances. Although we sympathize with Leshe and are impressed by his efforts to reconstruct from memory his use of the cash advances at this late date, we are unable to conclude from the evidence presented that the advances were used entirely for business purposes. The expenses listed on the reconstruction are noticeably imprecise,Cohan v. Commissioner, supra. Sunset Country Club Charges - Leshe admits he and his wife made personal use of the Sunset Country Club but estimates that 80 to 90 percent of the charges paid by the L & L Group were business related. Leshe's testimony one again convinces us that part of the charges were business related. We are unconvinced, however, that Leshe accurately identified the proportion of the charges that were business related. Applying theCohan rule on the basis of the record as a whole, we conclude that two-thirds of the payments to the Sunset Country Club were business related, and that only one-third of the payments are taxable to Leshe as constructive dividends.Other Charges, and Puerto Rico Air and Hotel - Leshe has failed to carry his burden of proving that the remainder of the expenses were business related. An exhibit Leshe prepared identifies most of the expenses labeled "Other Charges" as personal*461 expenses,In sum, we hold that the following amounts of travel and entertainment expenses paid by the L & L Group are taxable to Leshe as constructive dividends.
Expenditure 1975 1976 1977 Cash Advances to Leshe From U.S. Companies $ 3,150.00 $ 7,620.50 $ 6,150.00 From Puerto Rican Company -- -- -- Sunset Country Club Charges 967.60 1,431.86 1,075,03 Other Charges 96.20 487.45 223.35 Puerto Rico Air and Hotel -- 1,157.53 -- $ 4,213.80 $ 10,697.34 $ 7,448.38 *462
FIN AND FIFTY INVESTMENT FACTS
In August 1975, General Marine paid for stock in Fin & Fifty Investment Corp. ("Fin & Fifty"). General Marine also paid dues charged by Fin & Fifty in 1975, 1976, and 1977. Fin & Fifty owned a condominium apartment in Vero Beach, Florida, and General Marine's stock ownership entitled it to use the apartment. General Marine allowed its existing and prospective customers to use the apartment, and donated some of its time to charity. Leshe never used the apartment for personal purposes and his family never used it at all. Respondent determined that the following payments by General Marine to Fin & Fifty were constructive dividends to Leshe:
Year Amount 1975 $ 5,273 1976 1,500 1977 1,800 OPINION
As we have discussed
supra, where corporate property is used by a shareholder or his family for personal purposes, not proximately related to the conduct of corporate business, the value of the personal use of the property is includable in the shareholder's income. In this case we found as a fact that neither Leshe nor his family ever used the apartment owned by Fin & Fifty for personal purposes. We based our finding*463 on Leshe's testimony, which we found to be credible in this regard. We accordingly hold that Leshe has proven that General Marine's payments to Fin & Fifty did not represent constructive dividends to him.SHAREHOLDER WITHDRAWALS FACTS
Leshe and G. P. Jacobson, L & L's two shareholders, withdrew funds from various members of the L & L Group. The activities in their withdrawal accounts (as consolidated herein) are summarized as follows:
