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like the sponsorship payments to Mr. Hamilton of $39,000, enti-
tled the sponsor (1) to have (a) a decal with the sponsor’s logo
displayed on any race car that such driver drove and (b) its name
displayed on such driver’s racing uniforms and helmets and (2) to
require such driver to mention the sponsor’s name if and when
asked about his sponsors. The size and the location of the logo
and the name of a sponsor depended on the amount of the sponsor-
ship payment that such sponsor made to the race car driver.
Some time during 1999, Mr. Hopkins received a capital gains
distribution of $88,254 ($88,254 capital gains distribution) from
a family limited partnership that his deceased father had formed.
Around that same time, Mr. Hopkins received a taxable distribu-
tion of $204,002 ($204,002 profit-sharing plan distribution) from
his deceased father’s profit-sharing plan.
Mr. Hopkins’s S Corporation filed Form 1120S, U.S. Income
Tax Return for an S Corporation (1999 Form 1120S), for its short
taxable year that began on June 22, 1999, and ended on December
31, 1999. In the 1999 Form 1120S, Mr. Hopkins’s S Corporation
reported, inter alia, gross receipts of $87,249. In that form,
Mr. Hopkins’s S Corporation deducted, inter alia, (1) Mr.
Hopkins’s S Corporation’s expenditures of $16,501 as advertising
expenses and (2) Mr. Hopkins’s S Corporation’s expenditures of
$39,557 as promotional expenses. In the 1999 Form 1120S, Mr.
Hopkins’s S Corporation claimed an ordinary loss of $36,066 (Mr.
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