Welle v. Comr., 140 T.C. No. 19 (2013)

(petitioners, married couple, built personal home as general contractor, but used husband's C corporation to pass payments through to sub-contractor; C corporation also kept track of materials and labor utilized in building home; husband oversaw home building, selected sub-contractors and managed building project; petitioners paid C corporation for actual cost of the C corporation services utilized but did not pay customary mark-up of 6-7% that husband typically applied to other customers; IRS took position that failure to pay mark-up constituted constructive dividend to husband who was the sole shareholder of C corporation; court disagreed with IRS position, noting that presence of constructive dividend tied to whether corporation conferred benefit on husband so as to distribute available earnings and profits without any expectation of repayment; question is whether what C corporation earned is being given to shareholder or whether shareholder's capital investment is being returned; court unimpressed with IRS argument because, under I.R.C. Sec. 316(a), there must be a distribution of property to the shareholder that reduces the corporation's current or accumulated earnings and profits - constructive dividend present only when corporate assets diverted to or for shareholder's benefit; no diversion of corporate assets or distribution of earnings and profits occurred; use of corporate assets only incidental).