KENCO Restaurants, Inc. et al. - Page 1

                                 T.C. Memo. 1998-342                                  


                               UNITED STATES TAX COURT                                


                  KENCO RESTAURANTS, INC., ET AL.,1 Petitioners v.                    
                    COMMISSIONER OF INTERNAL REVENUE, Respondent                      


               Docket Nos.  15949-95, 15950-95   Filed September 24, 1998.            
                         15951-95, 15952-95.                                          


                    Pursuant to sec. 482, I.R.C., R reallocated among                 
               a group of commonly owned corporations certain                         
               management service fees charged by one member of the                   
               group to the other members.                                            
                    Held:  Ps have failed to prove that R abused his                  
               discretion by making an arbitrary, capricious, or                      
               unreasonable reallocation.  Held, further, Ps were                     
               negligent in making their initial allocation.                          


               John D. Steffan, for petitioners.                                      
               Diane D. Helfgott, for respondent.                                     

          1    Cases of the following petitioners are consolidated                    
          herewith:  K-K Restaurants, Inc., docket No. 15950-95; Bryan                
          Realty, Inc., docket No. 15951-95; Tiffin Avenue Realty Co.,                
          Inc., docket No. 15952-95.                                                  




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