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deductible business expense under section 162(a)1 or a
nondeductible capital expenditure pursuant to section 263. This
case was submitted on the basis of a stipulation of facts.
Petitioner, Harold Levinson Associates, Inc., (petitioner)
is a New York State corporation whose principal place of business
when the petition in this case was filed was Plainview, New York.
During and throughout the fiscal year ended January 31, 1990,
Edward Berro and Rita Berro each owned 50 percent of petitioner's
common stock. Together, they owned all of the common stock in
petitioner during and throughout the taxable year ended January
31, 1990. The relationship of Edward and Rita Berro is not
disclosed in the record.
In or about November 1987, petitioner, Edward Berro, and
Rita Berro, entered into an option agreement with Mark Goldman
and Barry Feldman (the optionees), whereby each of the optionees
was granted an option to purchase 24.5 percent of the common
stock of petitioner at an agreed upon exercise price. In return,
the optionees made efforts to cause petitioner to become an
authorized cigarette stamping agent (New York Stamp Tax Agent) or
the equivalent thereof for the sale of cigarettes in the State of
New York. Once acquired, a New York Stamp Tax Agent license
1 Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the years in issue, and
all Rule references are to the Tax Court Rules of Practice and
Procedure.
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