                           T.C. Memo. 1999-90



                         UNITED STATES TAX COURT



          JIM WOOD LAND CLEARING CO., INC., Petitioner v.
            COMMISSIONER OF INTERNAL REVENUE, Respondent



       Docket No. 20527-97.             Filed March 24, 1999.



       Allen L. Wood (an officer), for petitioner.

       Andrew M. Tiktin, for respondent.



               MEMORANDUM FINDINGS OF FACT AND OPINION


       FOLEY, Judge:   By notice dated July 14, 1997, respondent

determined the following deficiencies, addition to tax, and

penalties relating to petitioner's Federal income taxes:


                                  Addition to Tax           Penalty
Year          Deficiency          Sec. 6651(a)(1)        Sec. 6662(a)
1993           $78,349                   --                $15,670
1994            14,592                 $3,648                2,918
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All section references are to the Internal Revenue Code in effect

for the years in issue, and all Rule references are to the Tax

Court Rules of Practice and Procedure.

     After concessions by the parties, the remaining issue for

decision is whether, for 1993 and 1994, petitioner may reduce its

gross income by expenses paid to construct two houses.

                          FINDINGS OF FACT

     Petitioner is a Florida corporation whose principal place of

business was in Lake Placid, Florida, at the time the petition

was filed.    Petitioner does land clearing and demolition work in

Dade County, Florida.    During the years in issue, Allen Wood was

petitioner's president and sole shareholder.

     Allen Wood owned two unimproved lots in Highlands County,

Florida.   In 1993 and 1994, petitioner expended $128,025 and

$35,194, respectively, to construct two single-family houses on

Allen Wood's lots.    In calculating its 1993 and 1994 gross

income, petitioner subtracted these expenditures as cost of goods

sold.

     On February 1, 1994, Allen Wood formed Wood Developers, Inc.

(Wood Developers).    He was president and a 50-percent shareholder

of the corporation.    In March 1994, Allen Wood transferred to

Wood Developers his interest in the improved lots and Wood

Developers sold both properties.    On its 1994 Federal tax return,

Wood Developers reported the income from the sale of the

properties.
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                              OPINION

     Respondent determined that for 1993 and 1994, petitioner was

not entitled to reduce its gross income by construction expenses

relating to the two houses.   At trial, the Court asked Allen Wood

why these expenditures were characterized as cost of goods sold.

Allen Wood stated that he did not know why and acknowledged that

such treatment "could have been wrong".

     We sustain respondent's determination.   The construction

expenses related to houses that were built on Allen Wood's

property and ultimately sold by Wood Developers.    In essence,

petitioner paid Allen Wood's construction expenses.    See Estate

of Briden v. Commissioner, 11 T.C. 1095, 1134 (1948) (stating

that a shareholder's personal expenses are not a part of a

corporation's cost of goods sold), affd. 179 F.2d 619 (1st Cir.

1950).

     Petitioner contends, in the alternative, that it is entitled

to an advertising deduction for these expenses.     At trial, Allen

Wood attempted to establish a nexus between petitioner's business

and an advertising deduction by asserting that petitioner's

payment of the expenses was part of a plan to meet local

contractors.   We reject petitioner's contention.

     Advertising expenses are deductible if such expenses are

"ordinary and necessary".   Sec. 162(a); see sec. 1.162-1(a),

Income Tax Regs.   An expense is "ordinary" if it is customary or

usual within a particular trade, business, or industry, see

Deputy v. du Pont, 308 U.S. 488, 495-496 (1940), and "necessary"
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if it is appropriate or helpful for the business, see Welch v.

Helvering, 290 U.S. 111, 113 (1933).       It is not customary or

usual for land clearing businesses to advertise their services by

constructing houses.   In addition, payment of the construction

expenses was not appropriate or helpful in promoting petitioner's

land clearing business.   Moreover, the expenses were incurred for

Allen Wood's personal benefit, rather than for business

considerations relating to petitioner.       See International

Artists, Ltd. v. Commissioner, 55 T.C. 94, 104 (1970) (holding

that a business expense deduction will not be allowed for an

expenditure that is primarily motivated by personal, rather than

business, considerations).

     Contentions we have not addressed are irrelevant, moot, or

meritless.

     To reflect the foregoing,



                                            Decision will be entered

                                         under Rule 155.
