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Respondent acknowledges that Mohney performed substantial
services for petitioner on a regular basis:
Mr. Mohney had considerable involvement in
every facet of the operation of petitioner.
He made virtually every kind of decision
needed to operate the petitioner from hiring
employees, and making decisions on building,
remodeling, and sign design, to financial and
investment decisions and lending to related
parties.
She concludes: “Mr. Mohney’s involvement is tantamount to that of
an owner, someone who has financial stake in the petitioner,
rather than that of a consultant.” Thus, respondent believes
that Mohney performed these services not for compensation, but
for a return on his investment in petitioner.
We agree with respondent that, by themselves, Mohney’s
extensive activities on petitioner’s behalf do not establish the
existence between them of a business relationship consistent with
the payment of compensation. See Paula Constr. Co. v.
Commissioner, supra at 1058; cf. Whipple v. Commissioner, 373
U.S. 193, 202-203 (1963). There must also be evidence that at
the time the services were rendered the parties understood them
to be part of a business transaction conducted for profit.
Respondent’s disguised dividend theory relies heavily on the
absence of a written consulting agreement, timesheets, invoices,
bills, work reports, accrued liabilities on petitioner’s books or
other contemporaneous documentation of a consulting relationship.
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