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Petitioners have neither alleged that section 7491(a) applies nor
established their compliance with the requirements of section
7491(a)(2)(A) and (B) to substantiate items, maintain all
required records, and cooperate fully with respondent’s
reasonable requests.
I. Expenditures on Behalf of ITG
Section 162(a) allows a deduction for all the ordinary and
necessary expenses paid or incurred during the taxable year in
carrying on any trade or business, including a taxpayer’s trade
or business as an employee. See Primuth v. Commissioner, 54 T.C.
374, 377-378 (1970).
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). For Federal income tax
purposes, a corporation’s business is separate from the business
of its shareholders, officers, and employees. See Leamy v.
Commissioner, 85 T.C. 798 (1985) (shareholders, officers and
employees may not deduct as personal expenses those expenses that
further the business of the corporation).
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, supra; Kahn v. Commissioner, 26 T.C. 273
(1956); Das v. Commissioner, T.C. Memo. 1998-353. Payments by
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Last modified: May 25, 2011