Appeal of Ryan , 2 B.T.A. 1130 ( 1925 )

OPINION.

Marquette:

The sole question here is whether withdrawals by John C. Ryan from the Ryan-Correll Co. during the years in question constituted dividends or were an indebtedness of Ryan to the ■company. The Commissioner has held that they were dividends but we are unable to find any basis for such a holding. We recognize that a formal resolution is not essential to a dividend and that there may be an informal dividend where payments or withdrawals are made under circumstances which will constitute them dividends. Here, however, the withdrawals were recognized by Ryan as an indebtedness to the corporation and by the corporation as an asset, the very reverse of a dividend. Cash dividends were credited to the account and cash was paid thereon from time to time; and while no interest was paid on the balance, this is only evidence to be considered in determining whether the amounts were loans, and is in no wise conclusive that they were not. The withdrawals were not in proportion to stock holdings, and, upon Ryan’s own statement to his wife that the withdrawals rep resented his' indebtedness to the corporation, large amounts have been paid on account thereof since his death.

From all the evidence we are convinced that the withdrawals constituted loans by the corporation to Ryan and were improperly included as dividends by the Commissioner.