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In this case the absence of documentation reflects not only
the flexibility and informality that the circumstances permitted,
but also a deliberate policy. Mohney testified that he has been
indicted on obscenity charges over a hundred times. Having
learned from experience that documentary evidence of his
relationship to the adult entertainment businesses he controlled
posed a risk of incrimination, he kept such documents to a
minimum.
Contemporaneous documentation of a business relationship is
not altogether lacking. On his individual income tax returns for
the years 1985-91 Mohney described his principal business as
consulting and reported the payments from petitioner and the
other corporations he managed as gross receipts from this
business. In addition, we have the uncontradicted testimony of
Hagerman and Krontz that they understood a consulting agreement
to exist, and the testimony of Mohney that he always expected
compensation for his work. To be sure, such testimony serves
their interest, but we cannot reject it for that reason alone.
Lewis & Taylor, Inc. v. Commissioner, 447 F.2d 1074, 1077
(9th Cir. 1971), revg. T.C. Memo. 1969-82; Loesch & Green Constr.
Co. v. Commissioner, 211 F.2d 210, 212 (6th Cir. 1954), revg. a
Memorandum Opinion of this Court.
The evidence strongly suggests that Mohney did expect to
receive payment in some form from petitioner. In addition to the
payment in 1991, Mohney received a payment from petitioner in
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