Union Ganadera Regional de Chihuahua, Inc. - Page 12




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               We reject respondent’s argument that the costs Union Mexico             
          incurred for inspection and bathing of the cattle are strictly               
          Union Mexico expenses (which should not be passed on to                      
          petitioner).  The cattle-crossing operation was an integrated                
          operation.  Petitioner paid Union Mexico the disputed fees for its           
          share of the expenses incurred to perform necessary activities in            
          the ordinary course of its business.                                         
               To conclude, the expenses at issue were critical and                    
          indispensable to petitioner's business and therefore were ordinary           
          and necessary business expenses.  Accordingly, we hold that the              
          expenses relating to the costs of inspection and bathing of cattle           
          in Mexico were properly deductible as ordinary and necessary                 
          business expenses and did not constitute constructive dividends.             
          Because of this holding, the remaining issues go by the wayside.             
               In reaching our holding, we have considered all of the                  
          arguments presented and, to the extent not discussed above, find             
          them to be irrelevant or without merit.                                      
               To reflect the foregoing and the parties’ concessions,                  


                                                   Decision will be entered            
                                              under Rule 155.                          











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