-31-
answered the complaint on behalf of petitioner and the three
individuals. Relying on Wichita Terminal Elevator Co. v.
Commissioner, 6 T.C. 1158, 1165 (1946), affd. 162 F.2d 513 (10th
Cir. 1947), respondent contends that the November 28, 1986,
payment to Climaco was for Climaco’s representation in connection
with the answer Climaco filed to the May 11, 1987, complaint, and
that this constitutes an inurement to Zeve and Popovic.
Petitioner maintains that the $10,000 payment to Climaco was
to compromise Climaco’s claim for “over $25,000 in legal fees for
matters he had handled over the years”, unrelated to any criminal
proceedings against Zeve or Popovic, and unrelated to the defense
of the May 11, 1987, civil suit, which was not even filed until
about 5� months after the $10,000 payment.
We agree with petitioner’s conclusion.
The period of years in issue ends on September 30, 1986.
The $10,000 payment to Climaco was made nearly 2 months later.
Respondent contends the payment was for Climaco’s work in filing
an answer to a suit the complaint in which was filed almost 7�
months after the end of the period before us.
We conclude that, whether the payment was for future
services in part to Zeve and Popovic, as respondent contends, or
for prior unrelated services to petitioner, as petitioner
contends, petitioner’s payment to Climaco was not an inurement of
petitioner’s net earnings to any private shareholder or
individual for any period in issue in the instant case. Under
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