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incomplete, and at least one page has been submitted twice.7
Although the schedule identifies specific employees, the number
of hours each employee worked, and the general areas where work
was performed, the schedule does not show Omega’s actual cost of
labor, nor does the schedule break down the specific services
performed. The labor expenses included amounts for the building
and/or maintenance of corrals, silos, a radius wall, the orchard,
a septic system, buildings, equipment, and grounds. Omega was
already obligated for some of these expenditures under the
CBR/Omega agreement. Further, petitioners have not shown whether
Omega had already claimed deductions for the same labor expenses
as employees’ salaries. Importantly, it appears that the
services could have benefited Omega and/or petitioners, and they
have not shown how CBR obtained primary benefit from the
services. See Babilonia v. Commissioner, 681 F.2d 678 (9th Cir.
1982), affg. per curiam T.C. Memo. 1980-207.
Petitioners relied on their bookkeeper to notify the
accountant/tax preparer as to which expenses benefited Omega and
which benefited CBR. However, petitioners began living on the
CBR ranch property several years before CBR opened its doors for
operation in 1999. Because they lived on the CBR property before
7 Several periods are missing from each year a cash
deduction was claimed. Most periods from 1995 were omitted.
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