Case: S Corporation Shareholders Denied Deduction for Expenses Paid for the Corporation (T.C. Memo) (IRC §162)

S corporation shareholders denied deduction on personal return for their payment of corporation’s property taxes and utility expenses, the U.S. Tax Court held in a memorandum opinion. S corporation owed property taxes and utility expenses. Taxpayers, shareholders in the S corporation, paid the expenses. Taxpayer deducted the amounts on their personal returns. The IRS denied the deduction. A business expense deduction of an S corporation taken on a shareholder’s personal return is not allowed, the court held. Expenses of the S corporation must be reported on the S corporation’s returns, the court stated. The exception for businesses in dire financial ...