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And third, we reject petitioners' argument that numerous
business reasons and corporate meetings demonstrate that there
was a valid lease between GRC and petitioners. For example, Mr.
Spera cited numerous business reasons for the relocation of GRC's
refinery operations to include: Rental and utility costs
incurred by GRC for the business premises located in Hempstead,
New York, were extremely high relative to rental and utility
costs in other areas in New York outside of the New York
metropolitan area; and GRC could operate much more efficiently
and profitably by moving to an upstate New York location.
However, for the years at issue and thereafter, GRC continued to
pay rent for the Hempstead Building. Mr. Spera testified that
this fact is not inconsistent with the stated business purpose;
but instead naturally arises from the fact that the completion of
the Ashland Building was delayed due to a severe economic
downturn in GRC's business. We do not assign any weight to
petitioners' argument. Although GRC's gross receipts declined
from the taxable year ended July 31, 1988, to taxable year ended
July 31, 1994, GRC's gross profits and taxable income increased
significantly. Mr. Spera's proffered business reasons are
4(...continued)
to find that these payments were indeed payment of taxes under
the terms of the lease. GRC's Federal income tax returns do not
reflect a corresponding deduction for real estate taxes paid, and
petitioners have not demonstrated that GRC's deductions for rent
paid include payment of taxes on the Ashland Building.
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