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machine parts, $13,233 for fuel costs, and $11,412 for traveling
expenses. Petitioner claimed that the amounts paid on behalf of
Olympic were petitioner’s ordinary and necessary business
deductions.
Whether a corporation may deduct the expenses it pays for
the benefit of another corporation turns in large part upon the
relationship of the corporations. In Oxford Dev. Corp. v.
Commissioner, T.C. Memo. 1964-182, the Court held that a
corporation paying the expenses of another could not deduct those
expenses because they were the expenses of another corporation
and not its own. However, in Coulter Elecs., Inc. v.
Commissioner, T.C. Memo. 1990-186, affd. 943 F.2d 1318 (11th Cir.
1991), the Court allowed a parent to deduct the expenses of a
subsidiary corporation. In Austin Co. v. Commissioner, 71 T.C.
955, 967 (1979), the Court stated: “Expenses incurred for the
benefit of another taxpayer are clearly not deductible under
section 162, * * * but if the taxpayer pays the expense of
another for its own proximate and direct benefit, a deduction may
be allowable.”
Petitioner claims that amounts paid on behalf of Olympic
were ordinary and necessary business deductions. Respondent
argues that petitioner had no equity ownership in Olympic, and
the only relationship between petitioner and Olympic was that
stock in both companies was owned by Bone and Guerrero.
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