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evidence Crocus shared in the 25 percent of gross receipts
allocated to and reported by petitioner under the royalty
agreement. It was petitioner who conducted the trade show
business in the United States, Russia, and elsewhere in Europe.
Crocus’s role was limited to assisting with the logistics of
setting up and conducting the trade shows in the former Soviet
Union and obtaining a few Russian exhibitors for those shows.
Although the “parties agree that no adverse inference should
be drawn against either of them based on the ECI [royalty]
agreement,” the parties have neither filled nor illuminated the
“black hole” that results from their removal of the royalty
agreement and ECI from the picture. The removal of the royalty
agreement and ECI does not uncover a subsisting joint venture or
series of joint ventures between petitioner and Crocus.
We hold there was no joint venture between petitioner and
Crocus to operate foreign trade shows during the taxable periods
at issue.
Issue 2. In the Alternative, Whether and in What Amounts
Petitioner Is Entitled to Additional Business Expense Deductions
for the Taxable Periods at Issue, for Amounts Paid or Payable to
Crocus as Compensation for Its Services in Operating the Foreign
Trade Shows
Petitioner argues in the alternative that we should find
that Crocus was entitled to a markup on its direct expenses as
compensation for its services in operating the foreign trade
shows. Petitioner claims a compensation deduction under section
162(a)(1) for amounts paid or payable to Crocus as a markup.
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