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decision to use Manver was made. Additionally, the language in
the licensing agreements was almost verbatim language from a
draft licensing agreement that Hokanson at LL provided to the
Spanish investors on November 11, 1986.
The chronology shows that the trademarks could have been
registered in the name of any of the entities controlled by the
Spanish investors. The decision was driven by tax considerations
and had no relation to who actually developed the intangibles.
The choice of which corporate entity to use occurred, and the
chain of possession, and the subsequent licensing agreements were
created after the favorable tax ruling and attempted to alter the
facts to fit the tax planning.
"The freedom to arrange one's affairs to minimize taxes does
not include the right to engage in financial fantasies with the
expectation that the Internal Revenue Service and the courts will
play along." Saviano v. Commissioner, 765 F.2d 643, 654 (7th
Cir. 1985), affg. 80 T.C. 955 (1983). Courts have never regarded
"the simple expedient of drawing up papers" as controlling for
tax purposes when the objective realities are to the contrary.
Commissioner v. Tower, 327 U.S. 280, 291 (1946); Falsetti v.
Commissioner, 85 T.C. 332, 347 (1985). If MTNV and Manver had
not been related, MTNV would not have allowed the intangibles to
be registered in Manver’s name without compensation to MTNV.
Neither MTNV/MSI nor MANV/MDT had a business reason to pay Manver
for intangible rights that Manver did not own.
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