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that Machise would need to carry on its business. Following
execution of the agreement, the same employees and independent
contractors who had worked previously for Machise continued to
provide the same services for Machise.
Fred recommended that MIT Personnel be formed to enable
Bucci and Ingemi to set up a separate pension plan for the rank
and file employees. BBPA also advised Bucci and Ingemi that the
use of MIT Personnel would minimize their union problems, help
reduce their exposure to personal liability arising from
accidents to the Machise tank trucks, and minimize their exposure
to payroll tax problems if the truck drivers were classified as
employees rather than as independent contractors.
On July 1, 1977, Bruce transferred ownership of MIT
Personnel equally to Stella Bucci and Lena Ingemi, the mothers of
Bucci and Ingemi.
In 1980, the first of the tax years at issue, Bucci and
Ingemi owned the stock of Intercoastal and were its only
employees. Intercoastal owned the stock of Machise, the
operating company. The employees and independent contractors who
had worked for Machise continued to work for Machise, but now
were ostensibly employed by MIT Personnel, a company owned by the
mothers of Bucci and Ingemi.
The following findings of fact describe the form of the
transactions that give rise to the tax deductions at issue.
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