47
compensation, we have disallowed deductions in these categories
of $954,879 for Alondra and $9,922 for Edco. There is no reason
why the figures should be identical at both levels. The
disallowances to Alondra and Edco at the corporate partner level
result partly from a failure of proof by petitioners. Because we
have used our determination of Mr. Munro's reasonable level of
compensation to reach our results on Issue 5, we must consider
it, as well as Issues 3 and 4, when we consider the proper
adjustments needed.
Issue 6. Tax Treatment of Disallowed Payments at Two Levels
The strongest reason for upholding respondent's
disallowances of the deductions by Alondra and Edco in the
management services and wages categories (Issues (4) and (5)) to
the extent that we have is that the bulk of those unreasonable
payments ended up in Mr. Munro's hands as unreasonable
compensation. Our conclusion that the amounts that Pertinax
claimed as deductions exceeded what we have determined was Mr.
Munro's reasonable level of compensation is of course why we have
upheld respondent's disallowance of Pertinax's deductions in
these categories to the substantial extent that we have (Issue
3).
The record in its present state makes it difficult to trace
precisely how Pertinax used payments coming from the corporate
partners, including the payments for which we have disallowed
deductions by Alondra and Edco. However, the record, once we
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