- 55 -
We agree in part with respondent17 and in part with
petitioner.
B. Corporate Expenses
As a general rule, a corporation is to be treated as an
entity separate from the individuals who own it, and this is true
in respect of tax problems. New Colonial Co. v. Helvering, 292
U.S. at 442. An individual who pays the expenses of the
corporation generally is not entitled to deduct those payments,
unless those expenses are shown to be ordinary and necessary
expenses of that individual. Deputy v. du Pont, 308 U.S. 488, 493-
495 (1940); Betson v. Commissioner, 802 F.2d 365 (9th Cir. 1986),
affg. on this issue and revg. on another issue T.C. Memo. 1984-
17 As we discussed in connection with A. Schedule C
Income-1982, supra (also see supra table 4), the source and
application of funds method, as applied for 1982 in the instant
case, involves. a conclusion that petitioner indeed spent in 1982
all the money for which he sought a deduction on his 1982
Schedule C, except for his claimed $6,250 depreciation deduction
and his claimed $137,000 write-offs deduction. On the instant
issue, respondent contends that petitioner must substantiate his
claimed deductions, and contends, among other things, that the
substantiation requirement means that petitioner must show he
paid the amounts he seeks to deduct. We shall not allow
respondent to succeed both (1) in the 1982 Schedule C income
issue on the assumption that petitioner spent the money in 1982
and (2) in the 1982 deductions issues on the assumption that
petitioner did not spend the money in 1982. Respondent cannot
have it both ways. See, e.g., Huddleston v. Commissioner, 100
T.C. 17 (1993).
Accordingly, in light of our holding on the 1982 Schedule C
income issue, supra, we treat petitioner as having established
that he paid in 1982 the full amount of each of the 1982 items
for which he claimed a Schedule C deduction for 1982, except for
the claimed depreciation and write-off items.
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