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F.2d 1280 (10th Cir. 1975). These payments were for petitioners'
personal benefit, and, accordingly, are income.
B. Payments From Whittington, Inc., and Lovejoy
In 1985, Ray received three $1,750 checks from Whittington,
Inc., and Larry received six $1,750 checks from Lovejoy. On the
memo line of each of these checks, notations were made indicating
a $2,500 salary payment and purported withholdings of $750. In
1987, Whittington, Inc., issued four checks payable to Ray or his
creditors totaling $21,172. Respondent determined that, in 1985,
Ray and Larry received income of $2,500 relating to each check
with the aforementioned notation, and that, in 1987, Ray was
subject to tax on the payments from Whittington, Inc.
Conversely, petitioners contend that these checks related to
repayment of loans Ray made to Whittington, Inc., and Larry made
to Lovejoy. We reject respondent's and petitioners' positions
relating to the $2,500 payments and hold that petitioners are
subject to tax on $1,750 relating to each check. In addition, we
sustain respondent's determination relating to the 1987 payments.
III. Charitable Contribution Deductions
Respondent determined that petitioners may not deduct
charitable contributions to FOL. Section 170(a)(1) allows as a
deduction any charitable contribution as defined in subsection
(c). Section 170(c) defines a charitable contribution as a gift
to a corporation "no part of the net earnings of which inures to
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