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B. Royal Catering
A. Gelabert was the 100-percent owner of RC. RC was a
5-percent owner in MANV/MDT. RC’s 1987 management agreement with
MDT, which called for RC to receive 5 percent of MDT's gross
profits, was the vehicle through which A. Gelabert was to receive
his 5-percent ownership interest in MDT.
It is undisputed that A. Gelabert provided valuable services
to the Medieval Times operation. Petitioners state on brief that
A. Gelabert “was compensated primarily through the management
fees paid to Royal Catering, which he owned.” Pursuant to the
RC/MDT management agreement, MDT was to reimburse RC for amounts
RC paid as wages to RC employees, specifically A. Gelabert. The
management agreement provided for RC to receive fees under the
contract for “services” and also to receive amounts as
reimbursement for wages paid. Therefore, the nonreimbursed
amounts were not wages. Petitioners have failed to substantiate
which, if any, amounts paid to RC were reimbursable wages. We
conclude that the services that A. Gelabert provided to MDT,
through the RC/MDT management agreement, were to protect or
enhance A. Gelabert’s investment in MDT. See Olton Feed Yard,
Inc. v. United States, 592 F.2d 272 (5th Cir. 1979).
RC had been used as a vehicle by petitioners on several
previous occasions. MTNV loaned to RC $100,000 and then paid the
interest on the loan. RC was used to obtain visas for
A. Gelabert and Sans. RC did not have its own books and records;
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