Misuse of corporate funds could be deemed taxable dividends. One performer was compensated for his comedy shows and speaking engagements with payments made to his wholly owned C corporation. The business then paid personal expenses on his behalf, including for groceries, airfare, video rentals and more. The taxpayer deducted those amounts from the corporation’s income as legitimate business expenses. The IRS argued the payments represented constructive dividends to him. The U.S. Tax Court agreed with the IRS, finding that the taxpayer had participated in a tax-avoidance strategy. The court added penalties for negligence and for using frivolous or groundless positions. (TC Memo 2019-96)