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order ceased. The manufacturing equipment belonged to Pacer, not
petitioners, until July 1988, as evidenced by the July 1988
agreement transferring the equipment from Pacer to Venco. It was
not until September 1988 that Venco transferred the equipment to
petitioner, as evidenced by the bill of sale dated September 10,
1988, which also expressly reconfirms that title to the equipment
was not transferred from Pacer to Venco until July 1, 1988.
Accordingly, we conclude that petitioner’s involvement with
the manufacturing activity in question--which activity was
confined to the first 2 months of the 4 years at issue and
involved equipment still owned by Pacer--was in his capacity as
shareholder and manager of Pacer, and not in his individual
capacity. Generally, a taxpayer may not deduct expenses incurred
or paid on behalf of another taxpayer. See Deputy v. du Pont,
308 U.S. 488, 493-494 (1940). Similarly, a shareholder
ordinarily may not deduct expenses incurred as an investor in a
corporation. See Whipple v. Commissioner, 373 U.S. 193, 199-200,
203 (1963).
At trial, petitioners sought to establish through parol
evidence that, notwithstanding the unambiguous documentary
evidence to the contrary, petitioner actually acquired the
equipment from Venco in 1987. Petitioners argue that Venco
actually purchased the metal fabrication equipment from Pacer in
1987 and that in the fall of 1987, petitioner entered into an
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