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b. Miscellaneous Expenses
Petitioners contend that Butler, after paying Miller, spent
the remaining funds on Metro-related expenses. Petitioners,
however, give no specific account as to why, when, or how much of
the diverted funds were used to pay Metro expenses. Accordingly,
Metro is not entitled to deductions for these alleged expenses.
c. Officer’s Compensation
Petitioners’ alternative contention is that all funds
diverted to Butler are deductible by Metro as officer’s
compensation. Payments are deductible, however, only when they
are intended as compensation. See King’s Court Mobile Home Park,
Inc. v. Commissioner, 98 T.C. 511, 514 (1992). The testimony and
documentary evidence establish, and we conclude, that Metro did
not intend these payments to be compensation.
Petitioners’ concessions, that Metro omitted income and
overstated deductions, and our holding that Metro is not entitled
to offsetting deductions establish Metro’s underpayment of tax
for tax years 1988 through 1990.
B. Fraud
Fraud is established by proof of intent to evade tax
believed to be owing. See Clayton v. Commissioner, 102 T.C. 632
(1994). A corporation is liable for fraud if its officer has the
fraudulent intent to evade the corporation’s taxes. DiLeo v.
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