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an understanding to combine resources in sales of equipment to
certain companies, and to split evenly between Morgan, on the one
hand, and Diesel Power or CTC, on the other, the net commissions
resulting therefrom. This understanding was variously described
internally by a Morgan employee as "a joint venture with Diesel
Power", and by CTC employees as "the Morgan/Zand marriage" or the
"Zand/Morgan agreement". During 1975 petitioner and CTC
employees were involved in providing quotations and negotiating
orders for equipment under this arrangement. However, Diesel
Power employees furnished most of this service from Teheran.
Petitioner and CTC employees kept track of Morgan commissions and
made the decisions as to when Morgan commissions that were due
would be paid, in what amounts, and to whom. Morgan sometimes
corresponded with Diesel Power about orders and commissions, and
Diesel Power employees also kept CTC informed about commissions
that were due or had been paid. CTC also was involved in billing
Morgan for its share of certain expenses that Morgan apparently
had agreed to share with Diesel Power or CTC, sending a copy of
one such bill to Diesel Power.
L. Payments by Morgan
In the notice of deficiency for 1976 respondent increased
petitioner's income from Morgan by $473,552.70, $24,219.46 of
which was itemized as "PER BOOKS UNREPORTED" and $449,333.24 of
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