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petitioners are not entitled to deductions for payments on behalf
of their corporations of interest on the unpaid corporate
employment taxes.
Petitioners’ payments of the corporate employment taxes and
interest thereon in their capacities as shareholders were
actually capital contributions to their corporations. Payments
of the expenses of a corporation by a shareholder generally
“constitute either a loan or a contribution to the capital of the
corporation and are deductible, if at all, by the corporation.”
Rink v. Commissioner, 51 T.C. 746, 751 (1969); see also sec. 263;
Betson v. Commissioner, supra at 368; Gould v. Commissioner, 64
T.C. 132, 134 (1975); Koree v. Commissioner, 40 T.C. 961, 966
(1963); Jenkins v. Commissioner, T.C. Memo. 1983-667; sec.
1.263(a)-2(f), Income Tax Regs. (voluntary contributions by
shareholders for any corporate purpose are nondeductible capital
expenditures). Petitioners’ capital contributions did not
thereby entitle them to step into the shoes of their corporations
to claim ownership of the corporate employment tax funds for
purposes of a corporate deduction for a theft loss or to claim
deductions of corporate employment taxes reserved only for their
corporations.10
10On their 1993 and 1994 individual income tax returns,
petitioners claimed theft loss deductions for the embezzlement of
corporate employment taxes they “held as trustees” on behalf of
their corporations. In their briefs, petitioners did not explain
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