Discussion:Constructive Dividend of C Corp
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Discussion Forum Index --> Advanced Tax Questions --> Constructive Dividend of C Corp
Discussion Forum Index --> Tax Questions --> Constructive Dividend of C Corp
| 1 September 2009 | |
| My client, a C Corp, was audited by the IRS and the RA disallowed some items totaling around $150K and made them constructive dividends to the three shareholders. On the individual returns he assessed tax on the $150K on each return instead of assessing tax on $50K on each return. Am I missing something? Shouldn't each shareholder pay tax on $50K? The audit report says that the $150K constructive dividend is being assigned individually and severally to each shareholder. I really appreciate everyones help and advice. Thanks | |
| 1 September 2009 | |
| The dividends should be assigned to the receiving shareholder. Constructive dividends need not be proporional to stock holdings. See Seminole Thriftway Inc v. U.S.
There is no basis for assigning $150,000 to each shareholder. | |
| 1 September 2009 | |
| What about this individually and severally liable nonsense? Is the RA saying they are individually responsible for the $150K? But if one shareholder pays the tax aren't the other off the hook?
None of the shareholders benefited from the disallowed expenses. | |
| 1 September 2009 | |
| then they had bad representation on the audit
or maybe that's what you're trying to prevent from happening if so, keep fighting | |
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