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1993). Thus, respondent determined withholding deficiencies of
$53,608 for 1992 and $107,107 for 1993. Lastly, respondent
determined that petitioner was liable for sections 6651(a)(1) and
6656 additions to tax.
ULTIMATE FINDINGS OF FACT
The amount petitioner paid Union Mexico with respect to the
costs for inspection and bathing of cattle was an ordinary and
necessary section 162 expense.
OPINION
Our task is to decide whether petitioner is entitled to deduct
the payments it made to Union Mexico for costs of inspection and
bathing of cattle crossing into the United States (at petitioner’s
Santa Teresa facility) from Mexico. Petitioner maintains that
these payments were ordinary and necessary business expenses.
Respondent disagrees, and further argues that the disallowed fees
represented disguised dividends paid by petitioner to its sole
shareholder. Respondent further maintains that inasmuch as the
inspection and bathing processes occurred at Union Mexico’s San
Jeronimo facility prior to the cattle crossing into the United
States, the fees for these expenses (insofar as petitioner is
concerned) are neither customary nor appropriate.
The applicable Code provision is section 162(a), which
provides that “There shall be allowed as a deduction all the
ordinary and necessary expenses paid or incurred during the taxable
year in carrying on any trade or business”. The test for
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