- 21 -
Commissioner, supra; Gantner v. Commissioner, 91 T.C. 713, 725
(1988); Lohrke v. Commissioner, 48 T.C. 679, 684 (1967).9
The facts of this case indicate that petitioners made the
corporate employment tax payments out of their own pockets in
their capacities as stockholders of their corporations. They did
so with the purpose of keeping their corporations in business
without incurring Federal tax penalties. There is no evidence in
the record that petitioners promoted their own separate
businesses when they paid their corporations’ employment taxes.
Petitioners do not qualify for any of the exceptions to the
general rule that payments by stockholders of the obligations of
their corporations are not ordinary and necessary expenses of the
stockholders as required by section 162(a).
Finally, a payment by a taxpayer of interest on another’s
obligation generally is not deductible by the taxpayer. Williams
v. Commissioner, 3 T.C. 200, 202 (1944); Automatic Sprinkler Co.
of Am. v. Commissioner, 27 B.T.A. 160, 161 (1932). Therefore,
9Petitioners may deduct a payment they made on behalf of a
corporation if it is an ordinary and necessary expense of a trade
or business they own. Betson v. Commissioner, 802 F.2d 365 (9th
Cir. 1963), affg. T.C. Memo. 1984-264; Gould v. Commissioner, 64
T.C. 132, 134-135 (1975); Lohrke v. Commissioner, 48 T.C. 679,
688-689 (1967). If the expenditure is appropriate to protect or
promote that trade or business, the expense may be deductible by
the individual paying it. Gould v. Commissioner, supra; Lohrke
v. Commissioner, supra. However, a taxpayer may not deduct
payments made with the purpose of keeping in business a
corporation in which the taxpayer holds an ownership interest.
Betson v. Commissioner, supra; Lohrke v. Commissioner, supra.
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