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In the same manner as the lease strip deal, Crispin and
petitioner contrived the $2 million fee-splitting agreement to
shift petitioner’s income to CKH to be offset and sheltered by
CKH’s losses. We conclude that the principal reason petitioner
transferred $2 million of income to CKH was to avoid the
incidence of tax on $2 million in earned fee income. There was
no business purpose for this transfer.
We also note that LLDEC, which was CKH’s wholly owned
subsidiary, deducted the $524,657 paid to petitioner for
arranging the Decatur realty sale and denominated it an
“investment banking fee”. We find it anomalous that CKH and
LLDEC would have been charged an “investment banking fee” by
petitioner--if CKH and petitioner were joint venturers as
contended.
On the record presented in this case, there is no credible
evidence supporting a fee-splitting agreement or a joint venture
or partnership agreement between petitioner and CKH. No
partnership return was filed and no partnership income reported.
See Bagley v. Commissioner, 105 T.C. 396, 419 (1995), affd. on
other issues 121 F.3d 393 (8th Cir. 1997).
We accordingly hold that petitioner failed to report $2
million of the $2.5 million fee in income for 1997. See United
States v. Newell, 239 F.3d at 919-920.
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