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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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Last modified: May 25, 2011