An S corporation was not allowed to write off its shareholders’ expenses. The U.S. Tax Court concluded that legal and professional fees paid by shareholders weren’t properly deductible as ordinary and necessary business expenses of their wholly owned S corporation.
The court found that the taxpayers had failed to show that any of the $72,780 in disputed legal and professional fees were paid or incurred by the S corp. as ordinary and necessary expenses in carrying on their business. (T.C. Summary Op. 2018-38)
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