The Cleveland Trencher Company - Page 9

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          we have no doubt that Mr. Aydin procured the sales of trencher              
          machines to the Turkish Government, the record is obscure as to             
          precisely what services AA&H provided and when it provided them,            
          so as to give rise to the rights of AA&H or Mr. Aydin to receive            
          commission payments.  There is evidence that at least some                  
          necessary services had not been provided at the end of                      
          petitioner's fiscal year ended September 30, 1989, that the sale            
          of at least two trencher machines under the second agreement had            
          not been completed, and that petitioner had not received a                  
          substantial portion of the payments due from the Turkish                    
          Government.  The credit memo that petitioner produced does not              
          demonstrate performance during the taxable year.3  We therefore             

          petitioner's witnesses at trial testified that petitioner owed to           
          AA&H at that point $800,000, including interest, which is                   
          inconsistent with the view that all of the deduction which                  
          respondent allowed, plus this additional disputed amount,                   
          consists entirely of interest.  In characterizing the deduction             
          at trial, Mr. Aydin did not mention that any of it was interest.            
               3Additionally, it is arguable that petitioner's liability,             
          to the extent that respondent did not recognize it as a business            
          expense under secs. 162 and 267, did not arise from an arm's-               
          length arrangement between petitioner and AA&H and so cannot be             
          deducted.  See Bissey v. Commissioner, T.C. Memo. 1994-540; Van             
          Valkenburgh v. Commissioner, T.C. Memo. 1967-162.                           
               Petitioner in its trial memorandum said that it had, in                
          each of the years 1987, 1988, and 1989, a tax loss carryover in             
          excess of the amount in dispute.  Although Mr. Aydin made cursory           
          mention of this at trial, he did not pursue it then, and                    
          petitioner has made no argument to that effect on brief.  We                
          hold petitioner to have waived the argument and therefore do                
          not consider whether, in view of Mr. Aydin's acquisition of                 

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