AMW Investments, Inc. - Page 13

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          person’s expense.  Deductibility will not be denied when the                
          expense was incurred primarily for the payor’s business, and any            
          personal benefit conferred on the other party was merely                    
          incidental to the payor’s objective.  Second, the Court                     
          considered whether the expenditure was an ordinary and necessary            
          expense of the taxpayer's business.  We ask ourselves:  “Was the            
          expenditure an appropriate expense to further or promote the                
          payor’s trade or business”?  Id.                                            
               With respect to the first prong, petitioner alleges that it            
          stood to suffer direct and proximate adverse effects to its                 
          business as a result of the criminal investigation.  Petitioner             
          argues that its contributions to the Fund were related to                   
          petitioner's business in that its records were seized during the            
          search of MBS, its President was called to testify about its tax            
          returns, its relationship to Mr. Mohney was close and direct, and           
          it had a similar relationship with the other enterprises                    
          connected to the grand jury hearing.  Petitioner contends that              
          it, not Mr. Mohney, was the primary beneficiary of the payments             
          to the Fund, because the grand jury investigation and subsequent            
          criminal proceedings threatened its corporate existence.                    
          Petitioner contends that its contributions to the Fund were                 
          necessary to defend itself in proceedings in which its own tax              
          and accounting practices may have been called into question.                

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Last modified: May 25, 2011