Richard D. Nelson - Page 11




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            consideration arose, in great part, after petitioner had settled                           
            the litigation and was entitled to continue operating the bingo                            
            business.  Finally, where there has been substantial business                              
            activity by a corporation, it would be difficult to show that the                          
            corporation is a taxpayer’s alter ego or merely a nominee for                              
            purposes of Federal taxation.  See Moline Properties, Inc. v.                              
            Commissioner, 319 U.S. 436, 438-439 (1943); National Carbide                               
            Corp. v. Commissioner, 336 U.S. 422 (1949); Commissioner v.                                
            State-Adams Corp., 283 F.2d 395 (2d Cir. 1960).  Although                                  
            petitioner was a shill or front for the Lichtys and others,                                
            November was an active and operating entity that, in the course                            
            of conducting the bingo business, received income and issued                               
            checks for bingo business expenditures.  Moreover, November was a                          
            named plaintiff in the legal proceeding with the Lichtys.                                  
            November played too large and vital a role to be disregarded.                              
                  We proceed to consider whether petitioner has shown that                             
            respondent’s determination disallowing certain of November’s                               
            deductions was in error.  We first consider the 1991 legal fee                             
            that was incurred in connection with litigation involving the                              
            bingo operation.  November originally claimed a $1 million                                 
            deduction with respect to the $1.5 million fee for which an                                
            agreement and note were executed with/to Attorney Krieger.                                 
            Petitioner contends that the entire $1.5 million fee should be                             
            deductible by an accrual basis taxpayer because it was an                                  






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