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were stamped received by the Colorado Secretary of State on
December 13, 1995. The corporation never received an employer
identification number from the Internal Revenue Service and never
filed Federal income or employment tax returns. Petitioner, the
sole shareholder, intended to use this corporation for a number
of separate activities: First, the corporation was meant to
establish a vending machine route. Second, petitioner hoped the
corporation would take over his table pad business. Third,
petitioner thought that he could “pay” the corporation to provide
grading services needed for his Apollo Group employment, services
which he in turn would personally provide. Finally, petitioner
thought that he could “pay” the corporation rent for use of his
residence in grading papers and other activities, while
petitioner and his wife personally owned the residence. With
respect to the latter two activities, petitioner claimed
deductions on the 1995 return for alleged payments to the
corporation, which had been incorporated on or about December 13
of that year. Petitioner never transferred any funds to the
corporation or to an account designated for corporate use.
A taxpayer may deduct the ordinary and necessary expenses
paid or incurred during the taxable year in carrying on a trade
or business, including the trade or business of being an
employee. Sec. 162(a); Primuth v. Commissioner, 54 T.C. 374,
377-378 (1970). A taxpayer, however, generally must keep records
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Last modified: May 25, 2011