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the effect is the same as if the third party had paid the
taxpayer who in turn paid his creditor. Old Colony Trust Co. v.
Commissioner, 279 U.S. 716 (1929). Moreover, transactions
between closely held corporations and their shareholders warrant
close scrutiny. Paula Constr. Co. v. Commissioner, 58 T.C. 1055,
1058 (1972), affd. without published opinion 474 F.2d 1345 (5th
Cir. 1973); Electric & Neon, Inc. v. Commissioner, 56 T.C. 1324,
1339 (1971), affd. without published opinion 496 F.2d 876 (5th
Cir. 1974).
In this instance, all of these aforementioned items were
charged as corporate expenses. Petitioners did not report them
on their income tax returns. They contend that these items were
not items of income but were reimbursements for their payments of
corporate expenses.
Petitioners have submitted incomplete corporate records for
the taxable years in question. The checks submitted as evidence
merely represent payment by the corporations to petitioners.
Also, petitioners did not offer as exhibits any substantiation of
the expenses allegedly incurred on behalf of the corporations.
For example, Mr. Bowden did not proffer any of his credit card
bills that were paid by the corporations which would have
provided an opportunity to scrutinize the basis for the payments.
Paula Constr. Co. v. Commissioner, supra. Some of the disputed
items were facially questionable. For example, PWIC paid $700
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