- 13 -
of the payments were made by checks dated in 1983 and about
$45,000 of the payments were made by checks dated in 1984.
Petitioners' individual return was filed on a calendar year basis
and, accordingly, the 1984 payments ($45,000) would not be
deductible for the 1983 taxable year.
Ordinarily, for a payment to be deductible under section
162, it must be made by the taxpayer as an ordinary and necessary
expense of the taxpayer's own business. Betson v. Commissioner,
802 F.2d 365, 368 (9th Cir. 1986), affg. in part and revg. in
part T.C. Memo. 1984-264; Gantner v. Commissioner, 91 T.C. 713,
725 (1988), affd. 905 F.2d 241 (8th Cir. 1990); Lohrke v.
Commissioner, 48 T.C. 679, 684-685 (1967).
The initial obligation for the $33,000 of payments in 1983
(reimbursement of salesmen's expenses of $2,680.50 and helicopter
expense of $30,297) was that of the Mid-Continent corporations.
The payments, however, were made by checks drawn on the checking
account of petitioner's S corporation at a time when the Mid-
Continent corporations had ceased operations and were under a
court order not to operate. In order to continue the sale of
insurance and his flow of income, petitioner had to see to the
payment of the outstanding obligations of the Mid-Continent
corporations to salespeople and suppliers of goods and services.
Although he was no longer involved in the Ponzi type activity,
petitioner continued to exploit the customer lists from Riley
and, in general, to sell term insurance to farmers. There is no
Page: Previous 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 NextLast modified: May 25, 2011