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were nonentities. The alleged payments of "overrides" to the
partnerships lacked economic substance or a profit objective.
Petitioners have failed to prove otherwise, and the deduction of
these amounts by Machise/Intercoastal is properly denied.
Petitioners have also failed to establish any economic
consequence or business purpose for the "management fees" paid by
Machise to Intercoastal or to Bucci's alter ego, MIT Associates.
Bucci and Ingemi, and then Bucci alone, ran the operations of
Machise with no apparent regard to the execution of any
"management agreement" by Machise. They did so before execution
of the employee leasing agreements, and they continued to do so
afterward.
Petitioners have not demonstrated how much, if any, of the
management fees at issue represented the actual cash compensation
received by Bucci in his capacity as head of Machise. Once
again, the management fees appear to have taken the form of mere
bookkeeping entries or uncashed checks, designed to lower
Intercoastal/Machise's actual exposure to income taxes.
Petitioners have failed to demonstrate that the management fees
reflected economic substance, or that they were incurred with a
profit objective. Their deductions claimed for amounts in excess
of basic payroll costs are properly denied.40
40Petitioners also complain that while respondent has
disallowed payments made by Machise for management fees and
overrides, respondent has not credited BBPA, or MITA, or Bucci
with the income reported by them from such transactions. The
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