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not paid the respective fees to J.D. as of March 15 of the year
following the year in which it claimed the corresponding
deduction.
We hold that sections 404(d) and 461(h) preclude Clarkston
from deducting the fees for the years claimed. Unless otherwise
indicated, section references are to the applicable versions of
the Internal Revenue Code. Rule references are to the Tax Court
Rules of Practice and Procedure. We refer to petitioner Jimmy D.
Weaver as Weaver.
Background
All facts were stipulated and are so found. The stipulated
facts and the exhibits submitted therewith are incorporated
herein by this reference. Petitioners resided in Davisburg,
Michigan, when they filed their petition with the Court. They
filed with the Commissioner 1996 and 1997 Federal income tax
returns using the filing status of “Married filing joint return”.
During 1996 and 1997, Weaver owned 80-percent interests in
Clarkston and J.D. Clarkston is an S corporation whose business
is selling construction materials at wholesale. Clarkston uses
an accrual method and the calendar year to report its operations
for Federal income tax purposes. J.D. is a C corporation whose
business is installing windows. J.D. reports its operations for
Federal income tax purposes using the cash method and on the
basis of a fiscal year ending July 31. (We refer to J.D.’s
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