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marketing commission.” The financial statements do not show
dividends as having been paid to shareholders. The Israeli tax
returns reflect a deduction for these expenses and likewise do
not show any amount as having been paid as a dividend to
shareholders. No taxes were withheld or remitted to the State of
Israel on the payments to DPC and DPP.
The Special Commissions
Commencing in 1987, FIL also began making payments by wire
transfer directly to accounts in the name of “Flocktex
shareholders”. For the years at issue, the recipients and
amounts of these payments are set forth below:
1991 1992 1993 1994
David Deitsch $875,000 $2,350,000 $0 $1,000,000
Mordecai 0 0 0 0
Deitsch
Joseph Deitsch 875,000 2,350,000 0 1,000,000
Rachel Sandman 875,000 2,350,000 0 1,000,000
B. Mayer Zeiler 0 0 0 0
Jacob Pinson 875,000 2,350,000 0 1,000,000
Through withholding, income taxes were paid by the recipients to
the State of Israel on the amounts shown above. Letters issued
by Israeli authorities certifying receipt of the income taxes
specify that the sums were due in respect of “commission fees”
from FIL.
On its financial statements, FIL again classified these
payments as “selling expenses” and included the following
explanation: “In accordance with an agreement with the Company’s
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