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Petitioners reported $91,250 of the $182,500 as income and
do not contend that they may deduct any of their expenses of
caring for Mr. Stern during the 5 years that he lived with them.
Instead, petitioners contend in the petition that $91,250 is a
reimbursement of the expenses that they paid while caring for Mr.
Stern (reimbursement contention). We agree with petitioners.
The parties stipulated that Mr. Stern promised to pay
petitioners for their expenditures on his behalf, and that
petitioners expected repayment.3 Expenditures made with the
expectation of reimbursement are in the nature of loans or
advances, even without formal indebtedness. See Burnett v.
Commissioner, 356 F.2d 755, 759 (5th Cir. 1966) (attorney’s
payments of his client’s expenses were virtually certain to be
repaid, thus not deductible as business expenses), affg. and
remanding 42 T.C. 9 (1964); Universal Oil Prods. Co. v. Campbell,
181 F.2d 451, 474 (7th Cir. 1950); Glendinning, McLeish & Co. v.
Commissioner, 61 F.2d 950, 952 (2d Cir. 1932), affg. 24 B.T.A.
518 (1931); Herrick v. Commissioner, 63 T.C. 562, 566 (1975)
(advances made with expectation of reimbursement even though
there was no explicit promise or agreement to that effect);
Canelo v. Commissioner, 53 T.C. 217, 224-225 (1969), affd. per
curiam 447 F.2d 484 (9th Cir. 1971); Patchen v. Commissioner, 27
3 These stipulations are consistent with the findings of
fact in the proceedings of both the Marion Superior Court,
Probate Division, and the Indiana District Court.
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