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payroll. All employees were paid from a special payroll account
maintained by the Your Host corporation. The individual
corporate entities would deposit the funds needed to pay the net
wages of their respective employees and then Your Host
corporation paid out the wages, leaving a zero balance in the
payroll account. Each restaurant had a manager; however, the
manager could not change the menu or hours of business, nor
purchase supplies from other than the related supplier. The
costs of the administrative staff, insurance premiums,
administrative office expenses, advertising, and maintenance and
supervisory staff generally were allocated among the corporations
according to gross sales, except the Rochester corporation did
not share in advertising costs because its restaurants did not
benefit from Buffalo area advertisements. The Commissioner
allocated all of the income and deductions of all 11 corporations
to the Your Host corporation pursuant to section 482.
In Your Host, Inc. v. Commissioner, supra, we held that each
of the corporations was a viable business entity that paid its
own expenses. Although the restaurants opened over a 25-year
period, with the openings of the first restaurant for each
corporation over a 13-year period, we found that the restaurants
operated by the Your Host corporation were, on average, no older
and no better established than those operated by the other
corporations. Thus, the later-established restaurants were not
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