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have not provided the means for the Court to delineate which
insurance payments, if any, AJCS is entitled to deduct or were
ordinary and necessary expenses of AJCS’s business.
Another complicating factor is that AJCS claimed insurance
expenses under several different categories on its tax returns.
It is impossible to tell from the evidence whether the checks
petitioners submitted are already claimed on AJCS’s 1993 tax
return as insurance under other deductions or whether they are
included in other general categories. Finally, the record in
this case does not reveal whether the amounts in dispute are
AJCS’s expenses or more properly those of the affiliates.11
Petitioners have failed to show that AJCS is entitled to
deduct workmen’s compensation expenses of $269,815, and,
accordingly, we hold for respondent on this issue.12
11 Considering the fact that AJCS transferred its
construction contracts to the four affiliates at the beginning of
1993 and began operating solely as a management company, it is
more likely that the affiliates, and not AJCS, incurred ordinary
and necessary workmen’s compensation insurance expense. We must
note, however, that East was the only affiliate that obviously
claimed a deduction for workmen’s compensation insurance during
the period under consideration.
12 Respondent also contends that AJCS is not entitled to the
deduction because there had been no economic performance as
required by sec. 461(h) and the regulations thereunder. Because
of our conclusion above, however, it is unnecessary for us to
consider this argument.
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