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between petitioner and Crocus in proportion to their respective
direct expenses, or failing that, the net profits should be split
equally.
If the Court should hold there was no joint venture and
therefore include in petitioner’s income all gross revenue from
foreign trade shows, petitioner requests a deduction under
section 162(a)(1)–-in addition to its stipulated deductions for
its direct expenses, Expocentr rent payments, and Crocus’s
reimbursed direct expenses--for amounts paid or payable to Crocus
as a markup on Crocus’s direct expenses as additional
compensation for Crocus’s services in operating the foreign trade
shows. Petitioner argues that the Court should estimate the
markup under the Cohan rule (Cohan v. Commissioner, 39 F.2d 540,
543-544 (2d Cir. 1930)) and requests that the markup equal at
least 50 percent of net profits. Under either argument,
petitioner requests the Court to allocate to each of petitioner
and Crocus at least $2,135,614.50 (50 percent of $4,271,229 net
profit) for the last 7 months of the fiscal year ended July 31,
1995, and at least $3,058,173 (50 percent of $6,116,346 net
profit) for the fiscal year ended July 31, 1996.
Respondent argues that petitioner and Crocus did not conduct
any joint venture during the taxable periods at issue.
Respondent contends Crocus should not receive any markup as
compensation for its services because Crocus was the alter ego of
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