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subscription agreements and since BBPA now owed the same amount
to the W & A partners, BBPA caused these offsetting balances to
be canceled.
The other entities involved with W & A also recorded
offsetting journal entries to cancel the assets and liabilities
associated with their W & A transactions.28 Pursuant to these
journal entries, W & A was terminated because it owned no assets
and owed no liabilities.
On its partnership return for 1988, W & A reported
partnership taxable income of $3,586,156. This amount consisted
of $3,984,034, which W & A had billed as a "compensation fee",
less various net expenses of $447 and less $397,431, which Fred
called "Contract Termination Expense". This was the amount that
W & A agreed to forgo in exchange for early payment to terminate
the employee leasing agreement.
For the year 1988, W & A has filed an administrative
adjustment request, seeking to have its reported income of
$3,586,156 for 1988 reduced to zero if we determine that W & A is
28For example, at the time of the offsets BBPA owed Bucci
$3,771,517 as a loan of the borrowed payroll costs. Meanwhile
MPC, Bucci's entity, owed $3,586,603 to BBPA, which had accepted
W & A's account receivable from MPC in that amount. Moreover,
another Bucci entity, MIT Payroll Service, owed $184,712 to BBPA
(including a miscellaneous 1988 expense of $500). Since MPC and
MIT Payroll Service were controlled by Bucci, BBPA made a journal
entry offsetting its $3,771,517 payable to Bucci against its
$3,771,315 receivables from MPC and MIT Payroll Service,
resulting in an alleged net amount payable to Bucci of $202.
This payable was later eliminated when the MIT Payroll Service
entity was terminated.
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