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Instead, to support this deduction, petitioner relies on a June
22, 1977, entry in CTC's cash disbursements journal of $100,000
paid to CDC. His accountant, Mr. Dutton, could not confirm that
this payment was for a management fee or any other specific
services, nor was Mr. Dutton able to describe how the amount of
the payment was determined. Petitioner also offers no
explanation for the difference between the $100,000 payment made
June 22, 1977, and the claimed deduction of $96,369.
Accordingly, we hold that petitioner has not established that the
claimed management fee was paid or was an ordinary and necessary
business expense. Thus, he is not entitled to the deduction
claimed.
For the years 1978 and 1979 petitioner offered time
allocation reports and summary workpapers prepared by his
employees in support of the management fees claimed.
For 1978 the first page of Exh. 3138 lists the items which
make up the expense claimed. These items are wages allocable to
CDC, payroll taxes for such wages, a management fee equal to 10
percent of the wage expense, rents received, and rent credit. No
justification was given for either the purpose or the percentage
of the management fee. Furthermore, the time allocation reports
indicate that petitioner's employees merely wore different hats
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