Welle v. Commissioner

140 T.C. 420 (2013)

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Welle v. Commissioner

United States Tax Court
140 T.C. 420 (2013)

Facts

Terry Welle (plaintiff) was the president and sole shareholder of Terry Welle Construction, Inc. (TWC). TWC was in the business of building housing projects. Welle decided to build a house for himself, and TWC provided services in connection with the construction. Welle fully reimbursed TWC for the services, but TWC did not charge the amount above cost it would ordinarily charge an unrelated client. In effect, TWC forwent the profit it normally would have received from a client. TWC’s participation in the project did not disrupt its normal operations. The Internal Revenue Service (IRS) (defendant) determined that Welle had received a constructive dividend equal to the value of TWC’s forgone profit. Welle filed a petition with the United States Tax Court challenging that determination.

Rule of Law

Issue

Holding and Reasoning (Marvel, J.)

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