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these amounts was for reimbursement for expenses incurred by Mr.
Rowland and what portion was for compensation for services
rendered.
Mr. Brayshaw, with the assistance of Mr. Rowland, produced
several advertisements for the corporation. The corporation’s
bank account was used to pay $1,031.92 for the production of a
brochure and $625 for a magazine advertisement. Petitioners
argue that these amounts are deductible as advertising expenses.
A corporation formed for legitimate business purposes is an
entity separate from its shareholders. Moline Properties, Inc.
v. Commissioner, 319 U.S. 436 (1943). Furthermore, the business
of a corporation is separate and distinct from the business of
its shareholders. Id.; Deputy v. du Pont, 308 U.S. 488, 494
(1940); Crook v. Commissioner, 80 T.C. 27, 33 (1983), affd.
without published opinion 747 F.2d 1463 (5th Cir. 1984).
Consequently, a shareholder is not entitled to a deduction for
the payment of corporate expenses. Deputy v. du Pont, supra;
Hewett v. Commissioner, 47 T.C. 483 (1967).
We find that both the advertising expenses and the amounts
paid to Mr. Rowland were expenses of the corporation, not Mr.
Brayshaw’s expenses.3 Not only were the expenses paid with funds
3Furthermore, the bulk of the amount paid to Mr. Rowland was
paid in 1997, after the year in issue. Petitioners argue that
the corporation was using the accrual method of accounting and
had become obligated to make the payment in 1996. The relevance
(continued...)
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