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It appears that petitioner paid these expenses on behalf of
Olympic in order to protect Bone and Guerrero’s investment in
Olympic. They were Olympic’s sole shareholders, and any benefit
from the payments would have inured to them, not to petitioner.
Bone testified that he made regular trips to Washington State to
motivate Olympic employees and “get things rolling”. Bone stated
that he had a substantial personal investment in Olympic and that
the trips he took to Washington State helped him to protect his
investment. Petitioner did not have an equity interest in
Olympic, and the evidence does not establish that petitioner paid
the expenses of Olympic to protect petitioner’s business
interests. Accordingly, respondent’s determination regarding
this adjustment is sustained.
6. Insurance Expenses
Respondent determined that petitioner did not fully
substantiate its insurance expenses. At trial, petitioner did
not address this issue in any detail. While Bone testified that
petitioner was required by banking institutions to maintain
insurance on the lives of the shareholders, no corroborating
documentary or other evidence was offered on this point. Under
these circumstances, petitioner has not shown that the insurance
deduction was an ordinary and necessary business expense of
petitioner. Accordingly, respondent’s determination on this
issue is sustained.
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