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D. Notice of Deficiency
Respondent, in his notice of deficiency, disallowed all
expenditures made after October 4, 1996 (including the 1997
expenses), on the basis that the expenditures were the expenses
of Export rather than petitioner.
As to the pre-incorporation expenses, respondent disallowed
deductions for advertising, insurance, office expenses, and taxes
and licenses. Respondent allowed petitioner a depreciation
deduction of $138 for part of the office expenses. Additionally,
respondent disallowed $216 for travel and $705 for utilities.
Respondent disallowed the pre-incorporation expenses on the basis
that petitioner failed to establish that the expenses incurred
before the date of incorporation were ordinary and necessary
expenses or actually expended.
Petitioner argued at trial that this Court should disregard
Export’s corporate form so that Export’s expenses may be claimed
on petitioner’s Schedule C. Further, petitioner asserts that he
expended the amounts claimed, and that the deductions constituted
business expenses. Respondent counters that this Court should
uphold the corporate form and deny all expenses in excess of the
amounts allowed by respondent in his notice of deficiency.
OPINION
We first consider the disallowed Schedule C expenses which
represent post-incorporation expenditures. We then consider the
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