When a corporate officer uses corporate funds in such a way that do not constitute business expenses, but rather expenses to enrich his or her personal life, the officer may face a tax issue with the IRS. If those expenses are deducted on the corporate business tax return, the IRS may reclassify the expenses as personal to the shareholder and therefore a constructive dividend. A constructive dividend is taxable to the individual.
An example of a constructive dividend are personal expenses that a person runs up on a credit card and then pays for using a business check. In these cases, the IRS could reclassify the personal expenses as a constructive dividend. Depending on the case, the IRS may view overlapping of business and personal expenses as a civil matter and simply adjust the amount of individual taxes due. However, if the corporate officer is seen as looting the company for his or her personal gain, there is a good chance the IRS will seek a criminal prosecution.
Theodore L. Craft, Attorney at Law, has 30 years of tax law experience handling IRS tax issues and is an expert in determining whether a transaction is constructive dividend is. If you are faced with a constructive dividend tax issue in the Boston area, call Theodore L. Craft at 781-665-6872 to qualify your concerns.
Concentration in all tax issues with the Internal Revenue Service
Formerly with the IRS Office of Chief Counsel
Theodore L. Craft, Attorney at Law
49 Myrtle Street
Melrose, Massachusetts 02176
Telephone: 781-665-6872 | 617-523-7600 | 1-888-TAX-RISK
Fax: 781-662-2430
Email
Boston tax attorney Theodore L. Craft serves clients throughout Massachusetts and southern New Hampshire, including Cape Cod, Martha's Vineyard, The Berkshires, and the communities of Melrose, Springfield, Cambridge, Worcester, New Bedford, Dedham, Plymouth, Lynn, Saugus, Medford, Somerville, Waltham, Newton, Milton, Quincy, Hingham, Weymouth, Brockton, Marlborough, Peabody, Danvers, Agawam, Ludlow, Westfield, Chicopee, Holyoke, Northampton, Auburn, Middleborough, Wareham, Duxbury, Longmeadow, Peabody, Salem, and Danvers, MA, as well as, Nashua, Manchester, Merrimack, and Londonderry, NH.
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