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3. Petitioner’s Entitlement to a Business Deduction
Petitioner makes the alternative argument that it is
entitled to a business deduction for the $2 million paid to CKS.
Petitioner bears the burden of establishing its entitlement to
business deductions. See Rule 142(a). Petitioner paid $2
million to CKH, and CKH’s wholly owned subsidiary CKS received
$134,000 following the redemption of the RD stock by CKS.
No probative evidence has been offered regarding the
appropriate fee for participation in a transaction like the NSI
tax deal. Crispin’s testimony that a securities dealer might
have required up to 90 percent of the income is self-serving and
unreliable. We are also skeptical about Crispin’s claims with
respect to the purported risks CKH and/or CKH’s subsidiaries
undertook in “acquiring” and disposing of the Decatur realty, the
RD stock, and the tax benefit lease.
Nonetheless, CKH did enter into the transactions on January
30, 1997, pursuant to which NSI consummated its sale of LLDEC’s
(Corisma’s) shares to CKH. Following these January 30, 1997,
transactions, CKH transferred the RD stock and the tax benefit
lease from LLDEC (now a wholly owned subsidiary of CKH) to CKS
(CKH’s other wholly owned subsidiary). CKS engaged in additional
transactions to dispose of the RD stock and the tax benefit
lease. An independent securities dealer would have charged
petitioner for involvement and participation in the NSI tax deal.
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