Pan American Foods, Inc. - Page 12

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               The funds transferred by petitioner to Rubbik were deposited           
          into Rubbik’s bank account and then transferred to Koala Corp.              
          The evidence does not indicate that Gamesa received any funds               
          from Rubbik, from petitioner, or from Koala Corp., for services             
          that it performed to customize its products for U.S. markets.               
               The services provided by Gamesa, such as product design and            
          packaging, are the type of services that manufacturers                      
          customarily perform on their own behalf and for which separate              
          charges are not made to distributors.  Also, the distribution               
          agreements between Gamesa and petitioner did not provide that               
          petitioner would make payments to Gamesa for services relating to           
          product modifications.                                                      
               The evidence does not establish that the funds transferred             
          by petitioner to Cremin and Rubbik constituted ordinary and                 
          necessary business expenses under section 162(a).                           
              We have considered the parties’ other arguments and find               
          them without merit.                                                         
               To reflect the foregoing,                                              

                                             Decision will be entered                 
                                        under Rule 155.                               












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