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situations in which the taxpayer’s payment of the business
expenses of another serves to “protect or promote” the taxpayer’s
own business. Id. at 685.
AJCS must show that its motive for paying the affiliates’
expenses was in furtherance or promotion of AJCS’s trade or
business. See id. at 688. Secondly, AJCS must show that the
expenses are ordinary and necessary expenditures in furtherance
of its trade or business and not just in furtherance of the
affiliates’ trade or business. See id.
To determine AJCS’s motive for payment of the affiliates’
expenses, we can consider whether there is “a clear proximate
danger to the taxpayer and * * * a payment made to protect an
existing business from harm.” Young & Rubicam, Inc. v. United
States, 187 Ct. Cl. 635, 410 F.2d 1233, 1243 (1969). The
deduction is not available if the paying taxpayer fails to
demonstrate a direct nexus between the purpose of the payment and
the taxpayer’s business or income-producing activities. See
Lettie Pate Whitehead Found., Inc. v. United States, 606 F.2d
534, 538 (5th Cir. 1979).
In an attempt to come within this narrow exception,
petitioners argue that AJCS was bound by contract to pay the
costs of completing the contracts and, further, that the
affiliates could not afford the expenses. We find petitioners’
arguments unpersuasive. Petitioners also point out that AJCS was
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