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reimbursed for all of the expenses he incurred in 1991 as an
employee of Stone Jessup because the corporation did not have
sufficient funds to do so. As a director and officer of Stone
Jessup, petitioner had the authority to set corporate policy and
determine how corporate funds were spent.
During 1991 petitioner incurred the following expenses in
connection with his employment with Stone Jessup:
Vehicle $2,673.06
Parking fees, tolls, etc. 270.00
Travel 1,242.21
Meals and entertainment 2,603.23
Workshops, forums 90.86
Respondent disallowed petitioners' deduction attributable to the
above categories of expenses, explaining in the notice of
deficiency that "these expenses are not deductible because they
relate to the production of corporate income".
In 1972, in connection with his practice of law as a sole
proprietor, petitioner arranged a revolving line of credit with
Walnut Valley State Bank of El Dorado, Kansas (the bank). The
line of credit was used for payroll and other general operating
expenses incurred by petitioner in connection with his law
practice. This line of credit was ultimately assumed and used by
Stone Jessup. The bank required the line of credit to be secured
by accounts receivable and other assets of Stone Jessup, as well
as certain business assets owned and used by petitioner in
connection with his law practice.
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