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in order to carry on its business.6 Machise was not required to
pay the compensation fee until April 30, 1981, 4 months after MIT
80's obligation to furnish employees and independent contractors
had ceased. Additionally, the employee leasing agreement allowed
Machise to defer payment of this fee for more than 10 years,
until December 31, 1991, if it paid a 10-percent per year late
charge on all deferred unpaid portions of the compensation fee.
Thus, Machise was not required to, and did not, make any
payment of the compensation fee to MIT 80 during 1980. MIT 80,
under its cash method of accounting, accordingly reported a loss
of $2,247,552. The loss consisted of the following:
Salaries and wages $456,618
Rent--independent contractors 1,673,742
Payroll taxes 35,877
Pension plan 37,109
Insurance 41,823
Professional fees 2,383
Total 2,247,552
6Fred explained that, with respect to the employee leasing
partnerships, all but 5 percent of the compensation fee
constituted interest paid by Machise. It purportedly owed such
interest because of the partnerships' advances of payroll costs
during their first-year operations. This interest component is
to be distinguished from the "late charges". The late charges
represent interest imposed as a result of Machise's election not
to pay compensation fees in years after completion of the
respective partnerships' obligations to supply workers.
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