Patrick C. Badell and Lillian A. Badell - Page 12




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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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