- 36 -
or the parties’ stipulation indicates that Crocus was entitled to
receive a share of net profits from the 75 percent of gross
receipts to be paid to ECI.20
Petitioner negotiated all contracts with exhibitors located
outside the former Soviet Union, which accounted for 90 percent
of fees collected for foreign trade shows. If an exhibitor were
to cancel a contract with petitioner, petitioner would retain all
payments received as liquidated damages.21 Nothing in the record
indicates Crocus was entitled to receive any potential liquidated
damages retained by petitioner.
This Luna factor weighs against the finding of a joint
venture between petitioner and Crocus during the taxable periods
at issue.
4. Whether Each Party Was a Principal and Coproprietor,
Sharing a Mutual Proprietary Interest in the Net Profits and
Having an Obligation to Share Losses, or Whether One Party Was
the Agent or Employee of the Other, Receiving For His Services
Contingent Compensation in the Form of a Percentage of Income
There is no evidence petitioner and Crocus had an agreement
to share or did in fact share in the net profits or losses of
foreign trade shows. We infer from the stipulated facts
20However, the stipulation does indicate that ECI did in
fact reimburse Crocus for its direct expenses during the taxable
periods at issue.
21Neither Exhibit 7-J, a sample copy of a contract with an
exhibitor, nor the royalty agreement indicate whether payments
retained by petitioner as liquidated damages would be paid or
remitted to ECI in accordance with ECI’s right under Arts. 3.2
and 4.1 of the royalty agreement to receive 75 percent of the
gross receipts from foreign trade shows.
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