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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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Last modified: May 25, 2011