Midwest Industrial Supply, Inc. - Page 6

                                        - 6 -                                         
               Mr. Vitale operated Sussex Farm before the sponsorship arrangement     
          began in 1986, and he continues even today to operate Sussex Farm.  We believe
          that petitioner's 1982 resolution authorizing petitioner's sponsorship of   
          Sussex Farm was a halfhearted attempt to legitimize as a corporate deduction
          the payment of Mr. Vitale's personal expenses.  In fact, Mr. Vitale did not 
          even follow the terms of his corporation's resolution.  Although the        
          resolution authorizing the sponsorship was predicated, in large part, on    
          selecting horse names that refer to petitioner's products (e.g., "Ice Free  
          Nogarro, Ice Free Nobella, and Ice Free Czest"), no such horse names ever were
               Because the primary purpose of the corporate sponsorship was to benefit
          Mr. Vitale personally, petitioner's deductions were not proximately related to
          the operation of its business.  Mr. Vitale's ownership of a horse farm during
          the 1970's, his activity in several equestrian organizations, his authorship
          of articles on horse breeding, and his testimony at trial demonstrate that he
          has an ardent and longstanding interest in horses.  Mr. Vitale would have   
          pursued his equestrian activities whether or not petitioner "sponsored" his 
          horses.  We conclude that Mr. Vitale created this sponsorship arrangement in
          an effort to allow petitioner to pay (and deduct) all net expenses associated
          with his equestrian activities.                                             
               C.  Qualification of Expenses as "Necessary"                           
               Deductions are not "necessary" unless the taxpayer establishes that    
          they are appropriate and helpful to its business.  Carbine v. Commissioner, 83
          T.C. 356, 363 (1984), affd. 777 F.2d 662 (11th Cir. 1985).  In attempting to
          make this showing, Mr. Vitale made three claims:  (1) Petitioner's name was 
          announced over loudspeakers at horse shows as the sponsor of Sussex Farm's  
          horses; (2) petitioner placed printed advertisements in the programs of a   
          couple of shows; and (3) petitioner received a request for a price quotation

Page:  Previous  1  2  3  4  5  6  7  8  9  10  Next

Last modified: May 25, 2011