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parties agree that CCSI was an active corporation during the
years at issue. CCSI was created to produce and market the
sprinkler system, and petitioner transferred all equipment
related to the sprinkler system to CCSI. Thus every expense
related to the sprinkler system is an expense of CCSI, even if
petitioner paid the expense.
Furthermore, the fact that the expenses were deducted on
CCSI’s return when CCSI had income shows that the expenses are
those of CCSI. Petitioner cannot shift expenses back and forth
depending on where the income was. CCSI is an entity separate
from petitioner. Moline Properties, Inc. v. Commissioner, supra.
Since petitioner did not file a Schedule C with his 1995 joint
return, we assume that 1995 was the year for which CCSI claimed
expenses on its return.
Petitioner held out CCSI as the producer of the sprinkler
system, and, by incurring these expenses, petitioner was
furthering the business of CCSI. Leamy v. Commissioner, supra.
Therefore, we find that the expenses properly belong to CCSI and
not petitioner.5
5 Respondent has not raised the issue of whether any of the
expenses were nondeductible, preopening expenses. Richmond
Television Corp. v. United States, 345 F.2d 901, 907 (4th Cir.
1965), vacated and remanded per curiam on other grounds 382 U.S.
68 (1965). Given that neither CCSI nor petitioner had sufficient
investors, any plans or facilities for manufacturing the product,
nor any staff for sales of the product, this issue would
otherwise seem to be applicable.
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