Constructive dividends from C corp for mortgage

[cred65]

The property was used 68 days for business by corporate customers and company sales personnel. IRS Agent proposes taxing as constructive dividends all payments which were deducted as rent.

Are these dividends taxable as Qualified Dividends taxed at capital gains rate?

TIA

[JohnH]

I just completed an audit about 4 months ago in which constructive dividends were a significant issue for 2006 & 2007. The auditor did treat them as Qualified Dividends. As long as the ownership period is met and the other elements for qualifying dividends are present, it doesn't matter if they are constructive dividends. In my case, the taxpayer and his corporation combined probably paid less tax on the income than would have been paid had it been received as salary/wages, even after taking into account the loss of the deduction by the corp.

[OldJack]

The property was used 68 days for business by corporate customers and company sales personnel. IRS Agent proposes taxing as constructive dividends all payments which were deducted as rent.

Are these dividends taxable as Qualified Dividends taxed at capital gains rate?

TIA

If used for business as you say I would disagree with the agent's proposal and argue it is a valid business deduction. The real question might be is rent the proper value of the deduction and do you have documentation of the business use as required?