44
statement sua sponte as an admission, Fed. R. Evid. 801(d)(2).
We conclude from this evidence that upholding respondent's
disallowances at both the Pertinax and corporate petitioner
levels would, absent some offsetting adjustment, result in
substantial double taxation of corporate petitioner Alondra. See
introductory discussion supra pp. 21-22. Nevertheless,
petitioners have failed to refute respondent's disallowances of
deductions of $906,879 by Alondra and of $9,922 by Edco under
this heading. We therefore sustain respondent's disallowances of
all of Edco's $9,922 deduction and $906,879 of Alondra's
$1,239,596 deduction. However, we deal infra Issue 6 with the
double taxation issue generated by respondent's determinations
and our rulings on Issues 3, 4, and 5.
Issue 5. Management Wages
Respondent's statutory notice appears to have disallowed as
much of Alondra's total deduction of $1,571,315 for wages and
salaries as went to Pertinax--$884,148--and all of Edco's
21(...continued)
is in fact unfavorable), therefore cannot be used against either
party.
Respondent urges us to use Wichita Terminal against
petitioners because of Mr. Munro's failure to testify at trial.
Petitioners' counsel's assertion of Mr. Munro's bad health was,
however, an adequate explanation of his absence, particularly in
view of his advanced age at the time of trial. In any event,
respondent was just as free as or even more free than petitioners
to call Mr. Munro as a witness. We therefore consider Mr.
Munro's absence to be a neutral factor.
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