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Amazona Venture
In 1991, petitioner was introduced to James Garrett. Mr.
Garrett proposed that he and petitioner conduct an entertainment
promotion business that would include promoting concerts. Under
this proposal, petitioner would finance this venture, and Mr.
Garrett would establish and operate the business by arranging to
secure the services of various entertainers for bookings or
concerts.
On or about May 20, 1991, Amazona, an S corporation, was
incorporated to carry out the above venture. Petitioner received
and owned 100 percent of Amazona’s outstanding shares of stock.
At some future date after Mr. Garrett had established a
successful entertainment promotion business, petitioner planned
to give Mr. Garrett a stock-ownership interest in Amazona.
In early July 1991, petitioner opened an account for Amazona
at an Ohio bank. Mr. Garrett was authorized to withdraw funds
from this account. Petitioner, on various dates in 1991 and
1992, transferred or deposited funds to this account.
Substantially all of the funds ever credited to the account were
deposited in 1991, and virtually all of the funds had been
withdrawn by Mr. Garrett by the end of 1991.
On its initial 1992 return, Amazona originally reported
having an ordinary loss of $20,000. This loss resulted from a
deduction of a $20,000 entertainment fee that had been paid
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