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almost exclusively of rebate and incentive payments from B&H and
lease reimbursements from Hudiburg Chevrolet that properly
belonged to Flair Enterprises. No payments were made from Flair
Enterprises to Flair Racing for advertising or marketing
services. Flair Racing performed no services, engaged in no
sales during the years in issue, and earned no income in those
years.
Petitioners argue that the B&H payments to Flair Racing,
which B&H owed to Flair Enterprises under the terms of their
supply contract, were racing sponsorships and were properly
allocated to Flair Racing. Inconsistent testimony of petitioner
and B&H’s representatives regarding this issue was presented at
trial. One of B&H’s representatives denied to the auditing agent
that the payments were for a sponsorship. It appears that he
succumbed to pressure from his sales manager and his customer,
Flair Enterprises, because he later testified at trial that the
payments to Flair Racing did amount to a racing sponsorship.
Another B&H representative testified that B&H would not permit
petitioner to display B&H decals on their vehicles because B&H
could not afford to sponsor their many customers’ other race
cars. Thus, B&H received no advertising or marketing benefits
from its alleged sponsorship of the Legends race cars, which
benefits are the essence of sponsorship. See Gill v.
Commissioner, T.C. Memo. 1994-92, affd. without published opinion
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