C:4-63 When the IRS audited Winter Corporation's current year tax return, the IRS disallowed $10,000 of travel and entertainment expenses incurred by Charles, an officer-shareholder, because of inadequate documentation. The IRS asserted that the $10,000 expenditure was a constructive dividend to Charles, who maintained that the expense was business related. Charles argued that he derived no personal benefit from the expenditure and therefore received no constructive dividend. Prepare a memorandum for your tax manager explaining whether the IRS's assertion or Charles's assertion is correct. Your manager has suggested that, at a minimum, you consult the following resources:

IRC Secs. 162 and 274

Reg. Secs. 1.274-1 and -2