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bartering transaction under which Kelso provided roofing services
to B&W in B&W’s 1995 fiscal year.
3. Conclusion
We hold that B&W must include the $49,000 of roofing
services in income in its 1995 fiscal year, the year in which
Kelso provided the services.
B. Whether B&W May Deduct Expenses Advanced on Behalf of
Clients for Fiscal Years 1995 and 1996
Petitioners contend that B&W may deduct as ordinary and
necessary business expenses for fiscal years 1995 and 1996
amounts it advanced on behalf of its clients for filing and
recording fees, court costs, and similar expenses in those years.
We disagree.
Expenses paid by a taxpayer under an agreement that he or
she will be reimbursed for those expenses are loans or advances
and are not deductible business expenses. See Herrick v.
Commissioner, 63 T.C. 562, 569 (1975); Canelo v. Commissioner, 53
T.C. 217, 224 (1969) (attorney’s reimbursable costs are not
deductible), affd. per curiam 447 F.2d 484, 485 (9th Cir. 1971);
Hearn v. Commissioner, 36 T.C. 672, 674 (1961), affd. 309 F.2d
431 (9th Cir. 1962); Patchen v. Commissioner, 27 T.C. 592, 600
(1956), affd. in part and revd. on other grounds 258 F.2d 544
(5th Cir. 1958).
Petitioners contend that B&W can deduct the costs advanced
for its clients because, according to petitioners, repayment of
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