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respectively. Respondent also disallowed a deduction of $72,996
that Otrabanda had reported for amounts paid to the Cravath firm
during the taxable year ended June 21, 1991. However, the record
in these cases includes a memorandum from Cravath to Brunswick
dated December 2, 1994, in which Cravath itemized its $125,000
charge to Saba for professional services as follows:
The $125,000.00 fee was for negotiation and
drafting of the documentation, and for other related
services, in connection with: (a) the formation of Saba
($19,452.45), (b) the purchase by Saba of certain notes
($25,576.37), (c) the sale by Saba of such notes
($46,649.86), (d) the assignment of Saba’s right to
receive payments from such sale ($11,887.60) and (e)
other related matters ($21,433.72). * * *
In the same memorandum, Cravath itemized its $68,000 charge to
Otrabanda for professional services as follows:
The $68,000.00 fee was for negotiation and
drafting of the documentation, and for other related
services, in connection with: (a) the formation of
Otrabanda ($12,215.57), (b) the purchase by Otrabanda
of certain certificates of deposit ($12,537.03), (c)
the sale by Otrabanda of such certificates
($23,193.51), (d) the assignment of Otrabanda’s right
to receive payments from such sale ($6,209.58) and (e)
other related matters ($13,844.31). * * *
We hold that Saba and Otrabanda are entitled to deductions
for fees paid to the Cravath firm other than fees associated with
the purchase and sale of the PPNs and CDs. Based upon the record
presented, we hold that Saba and Otrabanda are entitled to deduct
$19,452.45 and $12,215.57, respectively, representing the fees
paid to Cravath in connection with the formation of the
partnerships, subject to the limitations on the deduction of
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