Such a reallocation could result in a recharacterization of the rent income as a constructive dividend
Moreover, if a company is organized as a C corporation, there is a question not only about whether the company can deduct costs for owner-related services, but also about whether such expenditures constitute a constructive dividend
taxable to the owner for whose benefit such services were provided.
Based on these facts, the Tax Court concluded that the rent-free use of the houses was in substance a constructive dividend
that was deemed to have been paid by the Florida corporation up through the corporate chain to Parker individually.
The value of brokerage commissions paid by a corporation to an agent under a dividend reinvestment plan is a constructive dividend
to each shareholder in the amount of each shareholder's pro rata share of the brokerage fees actually paid.
Amount paid by corporation for stock usually not taxable as constructive dividend
to surviving stockholder(s).
The IRS would be hard pressed to impose a constructive dividend
on the allocation of the corporation's opportunity to such new pass-through entity.
There has been some concern that a deferred compensation plan which covers only the majority or controlling shareholder/employee in a closely-held corporation might give rise to a constructive dividend
, probably in an amount equal to the premium payments for any life insurance policy used as an additional funding vehicle.
The fact pattern and tax issue used in this study (whether a planned bonus for the sole shareholder/president will be allowed as a salary deduction or will be classified as a constructive dividend
) are the same as those used and developed by Johnson (1993).
Where the retiring minority shareholder obviously does not want to agree to a minority discount in valuing his or her stock and the corporation pays a proportionate value of the company's value for the stock, IRS could argue that the part of the payment equal to what should have been the discount is a constructive dividend
and subject to ordinary income tax.
owner's deduction for premiums paid would exceed its constructive dividend
under Subpart F, resulting in a net tax benefit.
Payments to family members of shareholders: Amounts paid to a family member that were in excess of the value of services the family member provided constituted a constructive dividend
Miller held that a diversion of funds may be deemed a return of capital only if the taxpayer could demonstrate that the distribution, at the time it was made, was intended to be a return of capital and not a constructive dividend
. Other circuits had ruled differently on the application of IRC [section][section] 301 (distributions) and 316(a) (dividends) to informally transferred or diverted corporate funds in criminal tax proceedings.