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(Central); A.J. Concrete Forming East, Inc. (East); and A.J.
Concrete Forming West, Inc. (West).5
The stock ownership of these four affiliates6 was as
follows: (1) Georgia was owned 47.5 percent by Mr. Guerrero,
47.5 percent by Jeff Klewein, and 5 percent by Jeff Hoylman; (2)
Central was owned 47.5 percent by Jeff Klewein, 47.5 percent by
Rick Klewein, and 5 percent by Dave Entinghe; (3) East was owned
47.5 percent by Rick Klewein, 47.5 percent by Mr. Bone, and 5
percent by Robb Webb; and (4) West was owned 47.5 percent by Jeff
Klewein, 47.5 percent by Mr. Bone, and 5 percent by Ken Ritter.
On its 1993 tax return, AJCS reported the $2,680,500 it had
recognized on its partially completed contracts. On its 1993 tax
return, AJCS claimed deductions on line 20 totaling $2,808,034.
After transferring all of its outstanding contracts to the
affiliates, AJCS was no longer in the construction forming
business. AJCS’s primary business, after the transfer of the
contracts, was to provide management services to the four
affiliates that were performing on the contracts. Under
agreements, AJCS was entitled to charge each affiliate for a
portion of AJCS’s general and administrative expenses incurred in
5 Again, petitioners object to this finding as misleading
despite the fact that it was taken verbatim from the stipulation
of facts.
6 The term “affiliate” is used for convenience and is not
meant to connote “affiliate” as it is defined with regard to the
application of any Internal Revenue Code section.
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Last modified: May 25, 2011