Case summary Essay Example | Topics and Well Written Essays - 500 words - 2

Case summary - Essay Example b) There was no distribution of current and/or accumulated earnings and profits. It can be determined that TWC did not redirect actual value to the petitioner by failing to charge its normal profit margin when receiving the reimbursement. a) Even though it is not the court’s mandate to construct and inform arguments for the parties involved, it could clearly determine that the timing of respondent’s constructive dividend adjustment is highly inappropriate and untimely. TWC was reimbursed for its work during 2004 and 2005 while the petitioners relocated into the home in 2005 (Johnson, 502). Therefore, if there was any constructive dividend that had been received then it would have been received, and therefore brought up in 2004 and/or 2005, not 2006. b) According Section 316(a) a dividend is any allocation of property that a firm makes to its stockholders from its earnings for the trading period and profits retained from the past periods (Johnson, 501). TWC did not make any profit or earnings from the transaction with Mr. Welle for the construction of his home. c) Ault and Arnold rightly argue that a constructive dividend usually arise when a corporation awards an economic benefit, specifically earnings and profits, on a stockholder without the expecting any payment or adequate consideration for the same (360). d) Not all business expenditure by an incorporated company that bestows some economic benefit on a stockholder can be termed as constructive dividend (Ault and Arnold, 358). Loftin & Woodward, 577 F.2d at 1215. e) Respondent did not elucidate how a the decision to forego profits, especially when the stockholder reimburses the corporation in full for its services, results in distribution of property which reduces the earnings and or profits as envisaged in section 316(a). The respondent also failed to substantiate the assertions with a credible case that sets precedent. f) Incidental or insignificant use of corporate property does not justify