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sources of equity financing and repeated work on Norcom’s debt
financing. Quest personnel were also very active in Norcom’s
equipment financing.
Quest also played a critical role in hiring the last two
Norcom presidents. Mr. McColl hired both Mr. Cross and Mr. Rahn.
Additionally, Mr. McColl himself assumed numerous offices at
Norcom, without being paid by Norcom.
Quest played a very important role in negotiating Norcom’s
consolidation of its operations from four facilities down to a
single, larger facility. Quest assisted in negotiating the
purchase, sale, and leaseback of Norcom’s plant. Quest personnel
played similarly important roles in equipment acquisitions.
Quest participated in the development of Norcom’s business plans,
particularly with respect to financing and investment issues.
Quest reviewed numerous potential acquisitions for Norcom, which
would have allowed Norcom to expand and diversify its business.
Additionally, Quest hired Mr. Cross to provide a review of
Norcom’s operations after Mr. Lombardi resigned. We find that
petitioners have established that services were provided as
claimed in the petition and that respondent has conceded that the
compensation was reasonable in amount. Accordingly, petitioners’
payments of $1 million in 1995 and $700,000 in 1996 are
deductible under section 162(a)(1) as ordinary and necessary
expenses.
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