Maggie Management Company - Page 9

                                        - 9 -                                         
               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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Last modified: May 25, 2011