Meridian Wood Products Co., Inc., a Corporation v. United States of America, Harry F. Lenton and Colleen Lenton v. United States

In these consolidated appeals, taxpayers Harry and Colleen Lenton, and Meridian Wood Products, Inc. (Meridian) appeal from a judgment of the district court. The district court upheld the Internal Revenue Service’s (IRS) disallowance of certain business expense deductions taken by Meridian. The court also determined that Meridian’s reimbursement of these expenses to the Lentons constituted constructive dividends to them.

We are asked to decide whether the district court correctly determined that: (1) the IRS assessments of deficiency were timely; (2) Meridian’s evidence of deducted business expenses failed to meet the substantiation requirements of section 274(d), 26 U.S.C. § 274 (d) (1976); (3) Colleen Len- ton’s travel expenses were not properly deducted as business expenses by Meridian; and (4) amounts spent on a claimed roof repair were capital expenditures within the meaning of 26 U.S.C. § 263 (a) and therefore not deductible as a business expense pursuant to 26 U.S.C. § 162 (a). The Len-tons also contest the timeliness of the IRS’s assessment of deficiency. They further argue that the district court erred in concluding that Meridian’s disallowed expenses, for which Meridian…