Alondra Industries, Limited, d.b.a. Accent Insulation Company and Subsidiaries, et al. - Page 22

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                                       OPINION                                        
               The disputes in these consolidated cases primarily concern             
          the deductibility of:  (1) Payments by corporate petitioners                
          Alondra and Edco, which generally went to partnership petitioner            
          Pertinax and which it included in gross income on its Form                  
          1065;11 and (2) payments by Pertinax, most notably of                       
          compensation and rent to Mr. Munro.                                         
               This state of affairs creates a danger of double taxation to           
          corporate petitioners to the extent that they are disallowed                
          deductions for payments to Pertinax at level (1).  This is                  
          because disallowing deductions to Pertinax at level (2) for                 
          payments that originated in receipts from corporate petitioners             
          that are also disallowed as deductions to them at level (1) will            
          cause amounts disallowed to Pertinax to come back to corporate              
          petitioners as distributive shares of partnership income at level           
          (1).                                                                        
               In what follows, we will avoid double taxation by treating             
          Pertinax as a conduit so that the unreasonable compensation                 
          routed from the corporate partners to Mr. Munro through Pertinax            
          will be regarded for tax purposes as received by Mr. Munro from             
          the corporate partners.  We leave the calculations of the amounts           
          of the necessary adjustments to the Rule 155 computations.  See             
          discussion infra Issue 6.                                                   

          11However, rental payments by Alondra, Edco, and Pertinax                   
          went directly to Mr. Munro.                                                 




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