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return to the taxpayer, though substantially the
product of his services, legally arises not from his
own trade or business but from that of the corporation.
* * * [Id. at 202.]
See also Burnet v. Clark, 287 U.S. 410 (1932); Dalton v. Bowers,
287 U.S. 404 (1932); Weigman v. Commissioner, supra.
In this case, James’ transfer of $650,000 to Quotum provided
the necessary capital for Quotum to embark on what, with
hindsight, now appears to have been an ill-advised quest for
Russian airplanes. It was, however, a corporate quest in which
James was only one of several participants. James’ involvement
in the plan was as an officer and investor. His investment of
$650,000 is not deductible by him as an expense of a trade or
business of his own under section 162.
Christopher has an even weaker position regarding the
deductibility of his Schedule C loss. He simply gave $150,000 to
his brother. His brother was supposed to invest it in the plan
on Christopher’s behalf. If the plan worked and a viable
business resulted, Christopher thought that he might get involved
in operations and that his investment would generate a profit.
These facts simply do not establish that Christopher was in a
trade or business for purposes of section 162, nor do they
establish that his investment of $150,000 is deductible as “cost
of goods sold” as claimed on his 1992 Federal income tax return.
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