- 25 -
Before setting forth the reasoning to support our holdings,
we make some preliminary observations, all having to do with the
artificial situation created by the parties’ stipulation to
disregard the royalty agreement and ECI and the accompanying
obscurity, lack of transparency, and incompleteness of the
stipulated record regarding the business and financial
relationships of petitioner and Crocus during the taxable periods
at issue.
First, there is a significant omission from the stipulation
of facts.14 Unlike the stipulation with respect to foreign trade
shows conducted before January 1, 1995, which states that
petitioner reimbursed Crocus for its direct expenses and its
overhead expenses, the stipulation of facts states that if
petitioner must report all of the gross receipts from foreign
trade shows conducted after December 31, 1994, petitioner is
entitled to deduct “trade show expenses Crocus paid for which it
was reimbursed through ECI.” The stipulation of facts does not
define “trade show expenses”. Petitioner failed to substantiate
that Crocus was reimbursed for its overhead expenses. The
stipulation of facts states the amounts of Crocus’s “direct
14If we should hold that petitioner and Crocus were engaged
in a joint venture or joint ventures and agreed that net profits
should be allocated between them in the same proportion as
payments of foreign trade show expenses, the parties have not
expressly stipulated that such allocation would have substantial
economic effect. This omission is academic, inasmuch as we have
concluded that petitioner and Crocus did not engage in a joint
venture or joint ventures.
Page: Previous 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 NextLast modified: May 25, 2011