Medieval Attractions N.V - Page 139

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          directors and their assistance with the New Jersey and California           
          expansions.                                                                 
               Respondent’s primary arguments to support her determination            
          that the fees paid as management and consulting fees were                   
          disguised dividends are:  (1) Petitioners failed to establish               
          that services were provided as required by section 162(a);                  
          (2) payments were made in proportion to stockholdings; and (3) it           
          is unclear in what capacity RC, A. Gelabert, Santandreu, and                
          Segui were performing various tasks.                                        
               A.  Eurotor                                                            
                    1.  Services                                                      
               The preponderance of evidence is that substantial services             
          were provided to petitioners by various persons who also were               
          directly or indirectly owners of petitioners.  The Eurotor                  
          shareholders were successful businessmen who possessed a myriad             
          of skills from management to financing.  The Eurotor                        
          shareholders’ ability to select key management employees,                   
          suitable locations, and apply their knowledge of the tourist and            
          restaurant industries were services that were valuable.  The                
          shareholders' experience with an existing enterprise in Spain on            
          which this venture was modeled added to the value of the                    
          services.  Santandreu and Segui spent considerable time in the              
          United States, assisting with operations and providing management           
          services.  Unlike dividends, the payment of management fees was             
          not dependent on earnings and profits.  The Eurotor shareholders            




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