Mts International, Inc. And Robert C. Hughes, III v. Commissioner of Internal Revenue

OPINION

GILMAN, Circuit Judge.

Taxpayers MTS International and Robert C. Hughes, III appeal from a decision of the tax court finding that (1) a loss that Hughes sustained in connection with a stock sale was a capital loss rather than a theft loss for tax purposes, (2) withdrawals that Hughes made from MTS accounts were constructive dividends upon which he owed taxes, and (3) MTS was not entitled to deduct $196,672 for travel and entertainment expenses from its 1987 gross income. The taxpayers argue that a memorandum entered into between themselves and the government settled the dividend and…