Earl E. Cloud, Jr. and Sheila S. Cloud - Page 9




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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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