OPINION.
Van Fossan :
On the facts as stipulated we sustain the respondent. The parties agree that no dividend was declared or paid by the petitioner during the taxable year, and that no portion of the corporation's earnings was credited to the individual stockholders. It can scarcely be argued in the face of these facts that there was a constructive declaration or payment or any other action sufficient to satisfy the statute. The fact that the stockholders returned for taxation their proportionate shares of the earnings of the corporation and were not held liable for surtax under section 351 is not enough. The corporation, and not the stockholders, is the taxpayer presently before us. The statement in section 351 (d) that "any amount so included in the gross income of a shareholder shall be treated as a dividend received" does not carry the corollary that the corporation shall be entitled to a dividends paid credit.
The resolution authorizing the auditor to prorate the net income between the two stockholders did not purport to authorize payment of a dividend and in fact no payment was made. The fact that the petitioner was able to pay a dividend is, in these circumstances, immaterial.
The case of Valley Lumber Co. of Lodi, 43 B. T. A. 423, on which petitioner relies, is very different in its facts. There the dividends were declared and credited and, though not withdrawn, were subject to the demand and control of the stockholders. See Hustad Co., 43 B. T. A. 446, where dividends paid credit was denied under facts much more favorable to petitioner than those here present.
Decision will be entered for the respondent.
SEC. 27. CORPORATION CREDIT FOR DIVIDENDS PAID.
(a) Dividends Paid Credit in General. — For the purposes of this title, the dividends paid credit shall be the amount of dividends paid during the taxable year.