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Jaques v. Commissioner. Xinzheng Lin TX 8020. Citation: Jaques v. Commissioner, 935 F.2d 104 (1991), 67 AFTR 2d 91-1108, 91-1 USTC P 50292; aff’g TC Memo 1989-673 (1989), PH TCM P 89673, 58 CCH TCM 1026. History: CA-6 and TC for government. Ju dge : Martin. Facts:

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Jaques v commissioner

Jaques v. Commissioner

Xinzheng Lin

TX 8020


  • Citation:

    Jaques v. Commissioner, 935 F.2d 104 (1991), 67 AFTR 2d 91-1108, 91-1 USTC P 50292; aff’g TC Memo 1989-673 (1989), PH TCM P 89673, 58 CCH TCM 1026.

  • History: CA-6 and TC for government.

  • Judge:Martin


  • Facts:

    • The taxpayer made withdrawals from his wholly ownedcorporation to pay day-to-day personal living expenses and these withdrawals were reflected as “Account Receivable – officer” made on the books of the corporation. The taxpayer did not execute notes for these withdrawals nor was there a maturity date set for repayment. There was no collateral pledged as security for the repayment.

    • The taxpayer considered the withdrawals as loan which is not taxable. The government treated the withdrawals as constructive dividend but not loans.


  • Issue:

    Are withdrawals from taxpayer’s wholly owned corporation to pay his personal expenses taxable constructive dividends, not non-taxable loans?

  • Holding:

    Yes, the amounts withdrawn by taxpayer is not intended to be loans, thus were taxable distribution under Section 316 of the Internal Revenue Code.


  • Reasoning:

    • Despite classification of withdrawals as loans by taxpayer and corporation and taxpayer’s small, sporadic repayments, taxpayer didn’t show intent to repay at time withdrawals were made.

    • There was neither written loan agreement nor collateral pledged.

    • There was no fixed schedule of repayment or attempt to enforce repayment.

    • The corporation had substantial current earnings but did not pay any dividends during this period.


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