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* * * [corporations] and [the taxpayer] cannot convert * * * [the
corporate] expenses into his own by failing to claim repayment,
even though paid by him.” See also Orvis v. Commissioner, 788
F.2d 1406 (9th Cir. 1986), affg. T.C. Memo. 1984-533; Coplon v.
Commissioner, 277 F.2d 534 (6th Cir. 1960), affg. T.C. Memo.
1959-34.
As a general rule, a taxpayer’s payment of another person’s
obligation is not an ordinary and necessary business expense.
Deputy v. du Pont, 308 U.S. 488 (1940). Under this rule, a
shareholder, even a majority or sole shareholder, is not entitled
to deduct his or her payments of the corporation’s expenses.
Rink v. Commissioner, 51 T.C. 746, 751 (1969); Willits v.
Commissioner, T.C. Memo. 1999-230. For Federal income tax
purposes, a corporation is recognized as a separate taxable
entity from its shareholders. See Moline Props., Inc. v.
Commissioner, 319 U.S. 436, 438-439 (1943). Because a
corporation’s business is distinct from that of its shareholders,
officers, and employees, such persons may not deduct expenses
which promote the business of the corporation. Leamy v.
Commissioner, 85 T.C. 798 (1985); Kahn v. Commissioner, 26 T.C.
273 (1956); Das v. Commissioner, T.C. Memo. 1998-353.
In the present case, the loan from Franklin National Bank
was used not to pay petitioners’ expenses, but to pay those of
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