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designate Daryl Kell to perform the editing services.5 In the
1997 taxable year $214,106 was received by petitioner for the
editing services of Daryl Kell on the pictures Kazaam, The
Associate, Breakdown, and Moll Flanders. The deal memoranda
for these pictures also specifically designate Daryl Kell to
perform the editing services.6 In the 1996 and 1997 taxable
years Daryl Kell, the individual designated to perform the
services for petitioner, owned more than 25 percent of the
shares in petitioner. Therefore, we find that the income
received from the enumerated motion picture contracts was
personal holding company income. See Kenyatta Corp. v.
Commissioner, supra at 184 (and cases cited therein).
5 The deal memorandum for Fair Game provides: “EMPLOYER
[Petitioner] hereby lends to PRODUCER [Warner Bros.] the
exclusive services of EMPLOYEE [Daryl Kell]”. The deal
memorandum for Moll Flanders provides: “Daryl Kell will provide
music editing services for O’Trilogy Productions”. Additionally
the Executive Vice President-Post production of Warner Bros.
testified that Daryl Kell was the only person to perform the
required services under the loan-out agreement.
6 The deal memorandum for Kazaam provides: “Daryl B.
Kell/Calypso Music Inc. will provide music editing services for
Interscope Communications * * *”; “Daryl Kell will render music
editorial services”. The deal memorandum for The Associate
provides: “Daryl B. Kell/Calypso Music Inc. will provide music
editing services for Interscope Communications * * *”; “Daryl
Kell will render music editorial services”. The deal memorandum
for Breakdown provides: “Daryl Kell (Editor) Calypso Music, Inc.
(Lender) will provide music editing services to Dino DeLaurentiis
Co. (Producer)”; “Editor [Daryl Kell] will render music editorial
services”. The deal memorandum for Moll Flanders provides:
“Daryl Kell will provide music editing services for O’Trilogy
Productions”.
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Last modified: May 25, 2011