Somers v. Gardner (1966)

Id. at 36-37 (citations omitted).

Additionally, there is substantial authority for the general principle that the Secretary can allocate funds in fact paid out by a corporation in order to properly reflect the value of services rendered by employees and to prevent fraudulent arrangements which are tantamount to "shifting wages." However, no case has been cited nor found by this Court which authorizes the Secretary to "reallocate" moneys which have never in fact been distributed in any form by the corporation…

In Somers v. Gardner, 254 F.Supp. 35, 36, 38 (E.D.Va.1966) the District Court held that undistributed net income of a Subchapter S corporation could not be reclassified as wages, but did approve reclassification of a distributed dividend as wages deductible from benefits, stating: “Admittedly, where dividends are in fact received by the sole stockholder who has performed services for his corporation, there may be authority for permitting the Secretary to reclassify the de fa…

Gardner v. Hall, 366 F.2d 132 (C.A.10, 1966); Somers v. Gardner, 254 F.Supp. 35, 36, 38 (E.D.Va.1966); Koeller v. Finch, 315 F.Supp. 533 (D.Kan.1970); Ludeking v. Finch, 421 F.2d 499, 502-503 [dicta] (C.A.8, 1970).