1980 Tax Ct. Memo LEXIS 235 | Tax Ct. | 1980
MEMORANDUM OPINION
TANNENWALD,
This case was submitted fully stipulated pursuant to
At the time the petition1980 Tax Ct. Memo LEXIS 235">*236 in this case was filed, the Estate of Benjamin Liechtung had its legal address in New York, New York, and Sadie Liechtung resided in Brooklyn, New York.
Benjamin Liechtung (Liechtung), whose estate is a petitioner herein, and petitioner Sadie Liechtung were married during the taxable years 1974 and 1975 until Liechtung's death on January 18, 1975. Petitioners filed joint Federal income tax returns using the cash basis method of accounting for the taxable years 1974 and 1975.
Until his death, Liechtung was the sole shareholder of Puritan Estates, Inc. (Puritan), a New York corporation. From time to time prior to 1974, Puritan loaned him money for which it did not charge him any interest and on which no interest was paid in 1974 or 1975. As of December 31, 1973, the outstanding balance of loans made by Puritan to Liechtung was $298,645. As of December 31, 1974, the outstanding balance on these loans was $297,395. The outstanding balance on these loans as of January 18, 1975, was $296,283.
It is respondent's position that Liechtung received an economic benefit from the interest-free use of these funds, that the value of the benefit is includable in gross income pursuant1980 Tax Ct. Memo LEXIS 235">*237 to section 61, 1 and that he is entitled to no offsetting deduction because he neither was obligated to nor in fact paid any such interest.
Respondent acknowledges the applicability of our decision in
We recently reviewed our decision in
Respondent's argument that
It is well settled that issues raised for the first time on brief will not be considered when to do so prevents the opposing party1980 Tax Ct. Memo LEXIS 235">*239 from presenting evidence that he might have if the issue had been timely raised.
On its face, the notice of deficiency 3 neither raises nor precludes the issue of the deductibility of interest had it been legally required and paid. The pleadings do not sufficiently refine the issue. See
*240
Footnotes
1. All section references are to the Internal Revenue Code of 1954, as amended and in effect during the years in issue. See Footnote 3,
infra,↩ with respect to how the alleged economic benefit was calculated by respondent and his conclusion for the taxable year 1975.2. See also
.Martin v. Commissioner, T.C. Memo. 1979-469↩3. The explanation of adjustments in the deficiency notice states, in relevant part:
During 1974 and 1975, Puritan Estates, Inc. permitted you to use corporate property without compensation, which results in dividend income under provisions of the Internal Revenue Code, and are includible in your gross income as follows:
1974 1975 Average Outstanding Loan Balance $298,020.00 $293,339.00 Applicable Interest Rate 7% 7% Constructive Dividend to Shareholder $ 20,861.00 $ 20,534.00 Therefore, your taxable income is increased in the amount of $20,861.00 for the year 1974, and $20,534.00 for the year 1975."
Respondent has conceded that the constructive dividend for 1975 should be determined only for the period January 1 through 18, because only Liechtung was liable on the loan.↩