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United States, 437 F.2d 1222, 1226 (3d Cir. 1971); Estate of
Smith v. Commissioner, 110 T.C. 12 (1998).
Although the bylaws of Hillside Dairy require Mr. Schmidt to
repay amounts for which the corporation is disallowed a
deduction, Mr. Schmidt does not claim that he has repaid the
disallowed amounts. Indeed, there is no evidence in the record
to show that he did. Therefore, section 1341 does not apply. We
hold that Hillside Dairy’s payment of the Schmidts’ food, meals
and entertainment, and utilities expenses constitutes income to
the Schmidts.
Petitioners argue that the expenses are meals and lodging
expenses excludable under section 119. We have found to the
contrary. Thus, the food, meals and entertainment, and utilities
expenses are the Schmidts’ personal living expenses.
Personal, family, or living expenses are not deductible
except as otherwise expressly permitted. Sec. 262. A taxpayer’s
expenses for his or her own meals and lodging are personal
because they would have been incurred whether or not the taxpayer
had engaged in any business activity. Christey v. United States,
841 F.2d 809, 814 (8th Cir. 1988); Moss v. Commissioner, 80 T.C.
1073, 1078 (1983), affd. 758 F.2d 211 (7th Cir. 1985). In order
for personal living expenses to qualify as a deductible business
expense under 162(a), the taxpayer must demonstrate that the
expenses were different from, or in excess of, what he would have
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