business deduction

[KWF]

A sole proprietor has a business expense paid for on his behalf by an unrelated friend, with no intent of repayment.
Is the sole proprietor allowed the deduction for this expense?

[solomon]

A sole proprietor has a business expense paid for on his behalf by an unrelated friend, with no intent of repayment.
Is the sole proprietor allowed the deduction for this expense?

May be - it depends. See TC Memo 2010-286 (Lang). Substance over form.

Regarding if it were a gift, here a bit from the Supreme Court in Duberstein.

A gift in the statutory sense, on the other hand, proceeds from a “detached and disinterested generosity,”; “out of affection, respect, admiration, charity or like impulses.” And in this regard, the most critical consideration, as the Court was agreed in the leading case here, is the transferor’s “intention.”