Jimmy D. and Marlene M. Morloc Weaver - Page 11

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                  Pursuant to a method or arrangement between Clarkston, the                            
            service recipient/payor, and J.D., the service provider, the                                
            former did not pay the latter for its services within 2-1/2                                 
            months after the close of the respective calendar years in which                            
            the services were performed.4  Nor have petitioners made the                                
            requisite showing to rebut the presumption that Clarkston’s                                 
            arrangement with J.D. as to its services did not defer the                                  
            receipt of compensation within the meaning of section 404(a).                               
            We sustain respondent’s determination that the fees are not                                 
            deductible in the years claimed by petitioners.  See generally                              
            Rev. Rul. 88-68, 1988-2 C.B. 117.  In so doing, we emphasize that                           
            this holding rests on our finding that Clarkson and J.D., whose                             
            transactions with each other are subject to particular scrutiny                             
            because the two entities are related, had a method or arrangement                           
            between them which in substance deferred the receipt of                                     
            compensation by a service provider.                                                         
                  To reflect concessions,                                                               
                                                             Decision will be entered                   
                                                       under Rule 155.                                  




            4 Petitioners appropriately make no claim that the fees were                                
            paid under sec. 404 through the issuance of the intercompany                                
            note.  See Don E. Williams Co. v. Commissioner, 429 U.S. 569,                               
            581-582 (1977) (provision of a note does not constitute payment                             
            for purposes of sec. 404(a)).                                                               





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