Payments made to a stockholder does not automatically make the payment in the nature of dividends, if the requisites are not present.

A dividend is defined as a “corporate profit set aside, declared, and ordered by the directors to be paid to the stockholders on demand or at a fixed time. Until the dividend is declared, these corporate profits belong to the corporation, not to the stockholders, and are liable for corporate indebtedness.”1 On the basis of this definition, for a distribution or profit to be considered as “dividend”, the following essential requisites must be present:

1. The concerned corporation must have earnings or profits;
   
2. Such corporate earnings or profits must be set aside, declared, and ordered by the
   directors to be paid to the stockholders, on demand or at a fixed time; and
   
3. The distribution or payment of said corporate earnings or profits is in money or other
   property.
   

Consequently, any money received by a stockholder, even if he is a stockholder of the corporation, does not automatically make the payment in the nature of dividends, if the said requisites are not present. (Commissioner of Internal Revenue vs. United Distribution Management, Inc., CTA EB No. 974, October 30, 2013)