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There is no evidence that petitioner had to maintain an extensive
library or extensive files for Norman to do his work, or that
Norman required a dedicated area in which actually to write his
reports. There is no substantiation of Norman’s claim: “The
Dallas office was used about 10 days a month to deal with
clients”. Petitioner has failed to convince us that any use of
the apartment by Norman to further petitioner’s business was more
than incidental to the Duquette’s use of the apartment as a home.
Assuming such incidental use, petitioner has failed to show that
there was even a market from which to determine what a reasonable
rental would be for such incidental use.
Petitioner has failed to prove that it was required to pay
the Dallas apartment rental amount as a condition to the
continued use or possession of a portion of the apartment.
Consistent with the lack of evidence that petitioner’s use of the
apartment was anything more than incidental to the Duquettes’ use
of the apartment as their home is the conclusion that, if the
Dallas apartment amount was paid to or for the benefit of the
Duquettes, such payment was not made for business purposes but to
distribute to them, as owners of the corporation, profits or
funds unnecessary for business operations. Petitioner has failed
to prove that such payment was an ordinary and necessary expense
paid or incurred during the 1994 tax year in carrying on
petitioner’s trade or business.
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