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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
selected.
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
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