Milo G. and Sarah E. Chapman, et al. - Page 32

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            evidence that services were provided or value was added by                                   
            Northwest, while the tax benefits are quite apparent.  Northwest                             
            had no employees during the years at issue.  Moreover, Dura-Craft                            
            employees placed all of the orders in Dura-Craft office space and                            
            received all of the raw materials directly at the Dura-Craft                                 
            plant.  Simply, there was no "arm's-length" reason beyond these                              
            tax benefits for Dura-Craft to compensate Northwest.                                         
                  Based upon the entire record in this case, we conclude that                            
            Dura-Craft is not entitled to include the 5-percent processing                               
            fees paid to Northwest as part of its cost of goods sold for its                             
            taxable years ending October 31, 1988 and 1989.  We have                                     
            considered all of the other arguments made by petitioners and, to                            
            the extent we have not addressed them, find them to be without                               
                  To reflect the foregoing and concessions by the parties,                               
                                                       Decisions will be entered                         
                                                 under Rule 155.                                         

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