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Agalarov. Instead, respondent urges us to disregard the
corporate entities of petitioner and Crocus and view the
transactions at the stockholder level, in accordance with Article
10 of the stockholders’ agreement, under which petitioner’s net
profits of foreign trade shows conducted in the former Soviet
Union are allocated 50 percent to Agalarov, with the other 50
percent split between Pollak, Tseytin, and Kogan.13 Under
respondent’s theory, all gross receipts and expenses should be
allocated to petitioner, which would leave petitioner with net
profit of $4,271,229 for the last 7 months of the fiscal year
ended July 31, 1995, and net profit of $6,116,346 for the fiscal
year ended July 31, 1996.
We hold there was no joint venture between petitioner and
Crocus in conduct of foreign trade shows during the taxable
periods at issue. We interpret the parties’ stipulation of facts
to find that the foreign trade show fees paid to Crocus by
exhibitors located in the former Soviet Union have been included
in petitioner’s stipulated gross income; we also find that Crocus
retained such fees. We hold that petitioner is entitled under
section 162(a)(1) to deduct such fees collected and retained by
Crocus as compensation for the services of Crocus in operating
the foreign trade shows.
13In so doing, respondent disregards the provisions of Art.
10 of the stockholders’ agreement that provide different
allocations for the U.S. and Romanian trade shows of 20 and 10
percent, respectively.
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