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SRI expenses 164,352 128,268
In the Explanation of Adjustment attached to the notice of
deficiency, respondent explained that petitioner had not
established that the amounts claimed were paid or incurred during
those taxable years or that the expenses were ordinary and
necessary to petitioner's management and consulting business.
In their respective Tax Court cases, petitioner and
Ohanesian adopted positions substantially at odds with each
other, as well as with the position each had taken in the State
court case. Ohanesian maintained that his payments to petitioner
were for legitimate management expenses. Ohanesian further
contended that the consulting agreements were valid and
enforceable as written. Petitioner, on the other hand, posited
that it was an agent of Ohanesian and that the payments for the
automobiles and other expenses of the Ohanesian family and
related entities were on account of that relationship. In this
regard, petitioner theorized that, since it had recognized income
on moneys received from its principal (Ohanesian) that were used
to pay expenses as directed by Ohanesian, it was entitled to
deduct those payments. (Remaining adjustments were unrelated to
the Ohanesian-related items. It was generally understood by
petitioner and respondent that these items would be resolved
after the Ohanesian-related items were resolved, since the former
were so small as to be de minimis in comparison with the latter.)
In so arguing, petitioner relied on the existence and validity of
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