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joint return, petitioner reported no income and claimed $11,250
in expenses. Petitioner earned $75,813 and $78,912 from his
employment at NASA in 1992 and 1993, respectively.
In the notice of deficiency, respondent disallowed
petitioner’s claimed losses for lack of profit objective and
failure to substantiate. At trial, respondent contended that the
expenses petitioner claimed did not properly belong to him, but
belonged to the corporation. Respondent also contends that
petitioner’s expenses, if not those of the corporation, were in
the nature of preopening expenses.
Pursuant to section 162(a), a deduction is allowed for “all
the ordinary and necessary expenses paid or incurred during the
taxable year in carrying on any trade or business”. In order to
be deductible, business expenses generally must be the expenses
of the taxpayer claiming the deduction. See Gantner v.
Commissioner, 91 T.C. 713, 725 (1988), affd. 905 F.2d 241 (8th
Cir. 1990); Hewett v. Commissioner, 47 T.C. 483, 488 (1967). For
Federal tax purposes, a corporation will be recognized as a
separate taxable entity from its stockholders if either: (1) The
formation of the corporation was based on a legitimate business
purpose; or (2) after formation, the corporation conducted a
business activity. See Moline Properties, Inc. v. Commissioner,
319 U.S. 436, 438-439 (1943). A shareholder generally is not
entitled to a deduction from his individual income for his
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