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engaged in hauling gasoline and fuel oil. Machise was on the
accrual method of accounting and employed a fiscal year ending
June 30. Anthony Bucci (Bucci) and Joseph Ingemi (Ingemi) were
clients of BBPA. In 1975, Bucci and Ingemi each purchased 50
percent of Machise's stock. At BBPA's suggestion, they
transferred their Machise stock to their newly formed
corporation, Intercoastal Management Co. (Intercoastal). Bucci
and Ingemi were the only shareholders and employees of
Intercoastal. The primary purpose for BBPA's recommending the
formation of Intercoastal was to provide a means for Bucci and
Ingemi to enjoy a generous pension plan without providing for the
rank and file employees. During the years at issue, Intercoastal
filed consolidated Federal income tax returns with Machise. For
purposes of these findings and opinion, Intercoastal and Machise
are essentially the same entity. Both corporations were
dominated by Bucci and Ingemi, and, after Ingemi's death, by
Bucci alone.
Machise subsequently entered into an employee leasing
agreement with MIT Personnel Co. (MIT Personnel), a corporation
that was owned by Bruce Bryen. Bruce, at the time a young man,
agreed to undertake the ownership of MIT Personnel as a favor to
Bucci and Ingemi and in the hopes of attaining a promised $50,000
fee from them. Pursuant to this agreement, MIT Personnel was to
provide Machise with the employees and independent contractors
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