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B. The Parties’ Arguments
1. Petitioner’s Arguments
Petitioner contends that the assignment of income doctrine
should not be applied with respect to the $2 million portion of
the NSI consulting fee paid over to CKH. In support of its
argument, petitioner relies heavily on Crispin’s and Koehler’s
testimony concerning an alleged oral fee-splitting agreement.
Crispin and Koehler testified that it was necessary for
petitioner to involve CKH because petitioner, unlike CKS (a
securities dealer), would not be able to claim the $87 million
ordinary loss from the sale of the RD stock. Their testimony is
that, shortly after NSI retained petitioner, Crispin and Koehler
orally agreed that petitioner would split the fee and pay $2
million to CKH. Petitioner asserts that this alleged oral
agreement created something in the nature of a joint venture with
petitioner and CKH as partners working together to earn and,
ultimately, to share the fee.
Petitioner also relies on Crispin’s testimony that, during
its 1997 taxable year, petitioner entered into similar fee-
splitting agreements with third parties that assisted petitioner
in performing services for petitioner’s clients. Petitioner
contends that respondent did not dispute the validity of other
fee-splitting agreements. Petitioner also argues that respondent
would not have disputed its alleged fee-splitting agreement if,
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