Nicholls, North, Buse Co. v. Commissioner
United States Tax Court
56 T.C. 1225 (1971)
Facts
Nicholls, North, Buse Co. (Nicholls) (plaintiff) purchased a yacht. The transaction was approved unanimously by Nicholls’s board of directors. Herbert and Charlotte Resenhoeft owned all of Nicholls’s voting common stock. Herbert was president and director of Nicholls. Herbert and Charlotte also owned Nicholls nonvoting common stock along with their two sons, Robert and James. Robert and James operated the yacht freely for personal use. Herbert did not operate the yacht. However, the yacht did serve some purpose for Nicholls. The commissioner of the Internal Revenue Service (IRS) (defendant) sent a notice of tax deficiency to Herbert, originally asserting that Herbert owed taxes on the purchase price of the yacht plus expenses but later claimed Herbert was taxable on a dividend equal to the fair rental value of the yacht. Herbert and Nicholls challenged the notice of deficiency in the United States Tax Court.
Rule of Law
Issue
Holding and Reasoning (Withey, J.)
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