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petitioners’ business. See Stoddard v. Commissioner, T.C. Memo.
1982-720.
As a general rule, a taxpayer may not deduct a payment made
on another’s behalf unless the payment represents an ordinary and
necessary expense of the taxpayer’s own business, as distinct
from the business of another person or of some other entity in
which the taxpayer may have an ownership interest. See Gould v.
Commissioner, 64 T.C. 132, 134-135 (1975); Rink v. Commissioner,
51 T.C. 746, 751 (1969); Lohrke v. Commissioner, 48 T.C. 679,
(1967); see also Gantner v. Commissioner, 905 F.2d 241, 244 (8th
Cir. 1990) (“A shareholder is not entitled to a deduction from
his individual income for payment of corporate expenses.”), affg.
92 T.C. 192 (1989). The cases that have allowed deductions under
this rule generally have involved the taxpayer’s payment of
financial obligations of another party in financial distress and
have required the taxpayer to show “direct and proximate” adverse
consequences to the taxpayer’s own business from failure to pay
the other party’s obligation. See Hood v. Commissioner, 115 T.C.
172, 180-181 (2000), and cases cited therein.
Petitioners contend that the tax payments are deductible
under section 162 because petitioner paid the delinquent real
property taxes to prevent foreclosure on the Orange Tree and
Texas Jacks loans (the partnership loans), which he had
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