Charles R. Bowden and Sue I. Bowden - Page 38

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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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