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1978 and 1979 Federal income tax returns under substantially the same facts
and circumstances. We find this argument to be equally without merit. For
one reason, as respondent correctly points out, collateral estoppel is
inapposite because there was no prior "litigation". The prior proceeding was
merely a settlement made at respondent's Appeals level.
Issue 1. Income from TFC's Payment of Petitioner's Personal Expenses
Respondent asserts that TFC was used to pay personal expenses on
petitioner's behalf. Petitioner argues that the expenses in issue were
expenses of TFC that are deductible as ordinary and necessary expenses.
Taxpayers bear the burden of proving the Commissioner is incorrect in
her determinations. Rule 142(a); Welch v. Helvering, 290 U.S. 111 (1933).
Section 162(a) allows a taxpayer to deduct ordinary and necessary expenses
paid or incurred in carrying on a trade or business. "In order to be
deductible, business expenses generally must be the expenses of the taxpayer
claiming the deduction." Gantner v. Commissioner, 91 T.C. 713, 725 (1988),
affd. 905 F.2d 241 (8th Cir. 1990). Generally, it is not ordinary and
necessary for a corporation to pay its shareholders' expenses and obligations.
Greenspon v. Commissioner, 23 T.C. 138, 151 (1954), affd. on this issue 229
F.2d 947 (8th Cir. 1956); Justice Steel, Inc. v. Commissioner, T.C. Memo.
1980-466; Heim v. Commissioner, T.C. Memo. 1978-137. Furthermore, the payment
by a corporation of the personal expenses of its shareholder generally results
in a constructive dividend to the shareholder, to the extent of the
corporation's earnings and profits and to the extent the corporation has no
expectation of repayment. Challenge Manufacturing Co. v. Commissioner, 37
T.C. 650 (1962); Halpern v. Commissioner, T.C. Memo. 1982-31.
Petitioner has not presented any evidence that the expenses in question
were not his personal living expenses. He has not presented books and records
or even bills or receipts in order for us to determine the nature of the
expenses in issue. Accordingly, we hold that petitioner has failed to meet
his burden of proof, and we sustain respondent's determination that the
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