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tax returns. Petitioner and its affiliated corporations were
engaged in various businesses relating to the distribution and
sale of produce and the provision of transportation and customs
brokerage services.
In 1990, Meyer Customs Brokers, Inc. (MCB), was a Minnesota
corporation engaged in the customs brokerage business. Services
provided by customs brokers involve the processing and
documentation of import goods through U.S. Customs, the payment
of duties and freight charges, and freight forwarding.
Prior to the transaction discussed below, Joel Meyer (Meyer)
was president and sole shareholder of MCB, and the stock
ownership of MCB was not in any way related to the stock
ownership of petitioner. Other than the absence of any
relationship in the stock ownership of petitioner and of MCB, the
identity of the owners of the stock in petitioner is not
disclosed in the record.
In 1984, Meyer founded MCB. As of 1990, Meyer was 40 years
of age and had been involved in the customs brokerage business
for over 15 years. Meyer had developed extensive relationships
with the clients of MCB, and Meyer was the key individual who, on
behalf of MCB, maintained contact with the clients. The earnings
of MCB depended primarily on the efforts of Meyer. In each of
1988 and 1989, Meyer was paid a salary by MCB of $600,000 and
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