- 86 -
application. She could not identify any of the partnerships, MIT
80 through 86, nor W & A. She acknowledged that W & A appeared
as payor on her 1987 paychecks and on the Form W-2 filed with her
Federal income tax return for that year. However, she was not
aware that she had been a leased employee.
Machise considered the amount spent by W & A, some
$3,586,269 in 1987, as the amount of payroll costs incurred under
the employee leasing agreement. In 1987, W & A reported a loss
of $3,586,269, and a separate item of portfolio income of $113.
On their individual income tax returns for 1987, the
investors in W & A reported on Schedule E the partnership losses
from W & A in proportion to their interests. Respondent issued a
notice of final partnership administrative adjustment to W & A,
in which respondent disallowed the entire claimed loss of
$3,586,269 for the year 1987.
In 1987, the New Jersey Department of Labor canceled the
unemployment tax accounts of the partnerships whose accounts
could be reached under the applicable statute of limitations.
The Department of Labor transferred credits for the funds that
had been ostensibly paid by the partnerships from the
partnerships' accounts to Machise. The Department did so because
it had determined Machise to be the party that was liable for
unemployment tax contributions.
By 1988, Fred had decided that his assumption or legal
conclusion underlying the W & A arrangements--that W & A could
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