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MANV paid dividends once, during the fiscal year ended
November 30, 1987. The dividends totaled $2.5 million. No
dividends were paid by MDT from incorporation through at least
1991.
X. Marketing Agreement
A 1986 C&L letter addressed to Santandreu, marked "September
draft", addressed the best method of “structuring the arrangement
between A and B so that profits and losses are shared equally and
Company A retains the benefit of appreciation in the property.”
In the draft letter, C&L pointed out the disadvantages of
operating as a partnership and suggested the use of a management
agreement:
A simpler way to structure the agreement and still
accomplish the objectives of the property owner would
be for MANV to retain ownership of the property and
contract with MTNV to manage the project. Under this
approach, if profits and losses are shared equally by
the two companies, the possibility exists however, that
the Internal Revenue Service could determine that the
arrangement is actually a joint venture taxable as a
partnership. Thus, extra care would need to be taken
in drafting the management agreement. For example, a
management agreement between MANV and MTNV could be
drafted allowing the compensation of MTNV to be based
on a percentage of gross receipts, or a percentage of
net cash flow (i.e. gross receipts less operating
expenses). Depreciation and amortization would thus be
allocated entirely to MANV as property owner.
In 1989, an agreement between MANV and MTNV dated March 4,
1986, was sent to MSI. The agreement was structured in
accordance with the advice that C&L rendered to the Spanish
investors in October 1986 and required MANV to pay to MTNV
10 percent of MANV’s profits after taxes during MANV’s 1986
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