- 54 -
Respondent maintains, however, that by the first year in
issue, it was unrealistic for petitioner to continue to rely on
Dole's projections. Respondent contends that under similar
circumstances an independent party would have demanded an
increased commission rate before permitting the SCP contract to
renew automatically at the end of its initial 5-year term.
Petitioner, however, did not terminate the SCP contract even
though the commission rate did not cover petitioner's expenses.
We agree with respondent that a party operating at arm's
length would not have continued in the SCP contract under the
terms of that contract. We are persuaded that, even before the
years in issue, the Canelos group could not reasonably have
expected to achieve the volume of 10 million boxes projected by
Dole. Petitioner never had a profitable year while the SCP
contract was in effect. We doubt that an unrelated third party
would have been willing to continue in a similar unprofitable
arrangement. In our view, from the inception of the SCP deal the
Canelos brothers were not concerned with whether petitioner on
its own realized a profit from the SCP deal but, rather, whether
the Canelos organization as a whole prospered from the
arrangement. Canelos-owned or controlled entities were involved
in, and compensated for, all phases of the SCP deal including
providing seed, cartons, and chemicals (Apollo), growing and
packing the produce (Canelos Hermanos, Frutave, Adhota, or
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