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factors discussed above strongly weigh against the alleged
agreement’s existence. On the basis of Menards’s and TMI’s
behavior with respect to the accounting and reporting of the
payments and expenses, we conclude that Menards used TMI as a
means to continue Menards’s participation in Indy racing, while
shielded from liability, but did not do so pursuant to an oral
sponsorship agreement.57 The expenses that Menards paid were
TMI’s expenses for which TMI was obligated.
B. Deductibility of One Corporation’s Payment of Another
Corporation’s Ordinary and Necessary Business Expenses58
Although a corporation generally may not deduct payments of
another corporation’s expenses,59 see supra p. 65, and Menards
did not pay TMI’s expenses pursuant to an oral sponsorship
agreement, Menards still may be entitled to a deduction. An
exception exists for cases in which the taxpayer paid the other
corporation’s ordinary and necessary business expenses in order
to “protect or promote” the taxpayer’s own business. See, e.g.,
57We note that respondent does not allege, nor do we find,
that TMI should not be respected as a separate taxable entity.
On the contrary, TMI was formed for a business purpose and has
carried on that business since its formation. See Moline Props,
Inc. v. Commissioner, 319 U.S. 436, 439 (1943).
58Respondent does not question whether the TMI expenses were
ordinary and necessary business expenses incurred with respect to
TMI’s business.
59Even if the corporations were under common ownership or
control, the payor corporation may deduct, in limited
circumstances, only expenditures that further its own business.
See Oxford Dev. Corp. v. Commissioner, T.C. Memo. 1964-182.
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