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Respondent determined the following deficiencies, additions,
and penalties with respect to petitioner’s Federal income taxes:
Accuracy-Related
Addition to Tax Penalty
TYE July 31 Deficiency Sec. 6651(a)(1) Sec. 6662(a)
1995 $3,872,347 $960,069.25 $774,469.40
1996 5,405,717 1,072,572.62 1,081,143.40
After giving effect to various concessions,2 the issues
remaining for decision are:
1. Whether petitioner and Crocus International (Crocus)
were engaged in a joint venture or joint ventures to conduct
trade shows in the former Soviet Union (collectively, the foreign
trade shows) during the last 7 months of the fiscal year ended
July 31, 1995 and during the fiscal year ended July 31, 1996.
Our holding that petitioner and Crocus were not engaged in any
joint venture forecloses the question of how joint venture
profits should be allocated between them.
2. In the alternative, whether and in what amounts
petitioner is entitled to business expense deductions for the
last 7 months of the fiscal year ended July 31, 1995 and for the
fiscal year ended July 31, 1996, for amounts paid or payable to
Crocus as compensation for its services in operating the foreign
trade shows in addition to deductions already allowed petitioner
2Petitioner has conceded, among other things, its liability
for additions to tax under sec. 6651(a)(1) and accuracy-related
penalties under sec. 6662(a) for the taxable periods in issue on
any underpayments finally determined.
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