- 135 -
to pay off its compensation fees and late fees and still stay in
business. We do not find such figures convincing. They fall far
short of being the fact-based realistic calculations demanded by
profit-motivated investors before they place their money at risk.
Cf. Soriano v. Commissioner, 90 T.C. 44, 56-57 (1988). Moreover,
as we noted earlier, Fred extended his tax planning services to
include eliminating liability for the income that the
partnerships would report in their later years. Such income was
largely "phantom" income; it produced no gain but merely
reflected the unwinding of the circular employee leasing
structures. Fred therefore undertook to preclude any liability
of his clients for this noncash "compensation fee" or "late fee"
income by the expedient of placing them in other tax shelters.
Moreover, neither Fred nor Bruce, nor any of the partners in
the leasing partnerships, demonstrated even a remote knowledge of
the fuel trucking industry in which their partnerships had
allegedly invested several millions of dollars. Although the
partnerships were allegedly in the employee leasing business,
Fred and Bruce did nothing to pursue a profit for those
businesses. They instead ceded to Machise all rights and
responsibilities for hiring, assigning, paying and firing the
allegedly leased employees and independent contractors. "In sum,
the * * * [managing] partners took absolutely no steps to protect
or further the interests" of their partnerships. Flowers v.
Commissioner, 80 T.C. 914, 938 (1983).
Page: Previous 125 126 127 128 129 130 131 132 133 134 135 136 137 138 139 140 141 142 143 144 NextLast modified: May 25, 2011