                        T.C. Memo. 2003-135



                      UNITED STATES TAX COURT



             COMTEK EXPOSITIONS, INC., Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 5130-00.                Filed May 13, 2003.


     Frank Agostino, for petitioner.

     Gerald A. Thorpe and Edward Laubach, Jr., for respondent.



                        MEMORANDUM OPINION

     BEGHE, Judge:   This case is before the Court fully

stipulated under Rule 122.1   The stipulation of facts and

attached exhibits are incorporated herein by this reference.




     1
      Unless otherwise specified, all Rule references are to the
Tax Court Rules of Practice and Procedure, and all section
references are to the Internal Revenue Code in effect for the
years at issue.
                               - 2 -

     Respondent determined the following deficiencies, additions,

and penalties with respect to petitioner’s Federal income taxes:

                                                  Accuracy-Related
                               Addition to Tax        Penalty
TYE July 31       Deficiency   Sec. 6651(a)(1)      Sec. 6662(a)

   1995           $3,872,347      $960,069.25        $774,469.40
   1996            5,405,717     1,072,572.62       1,081,143.40

     After giving effect to various concessions,2 the issues

remaining for decision are:

     1.   Whether petitioner and Crocus International (Crocus)

were engaged in a joint venture or joint ventures to conduct

trade shows in the former Soviet Union (collectively, the foreign

trade shows) during the last 7 months of the fiscal year ended

July 31, 1995 and during the fiscal year ended July 31, 1996.

Our holding that petitioner and Crocus were not engaged in any

joint venture forecloses the question of how joint venture

profits should be allocated between them.

     2.   In the alternative, whether and in what amounts

petitioner is entitled to business expense deductions for the

last 7 months of the fiscal year ended July 31, 1995 and for the

fiscal year ended July 31, 1996, for amounts paid or payable to

Crocus as compensation for its services in operating the foreign

trade shows in addition to deductions already allowed petitioner


     2
      Petitioner has conceded, among other things, its liability
for additions to tax under sec. 6651(a)(1) and accuracy-related
penalties under sec. 6662(a) for the taxable periods in issue on
any underpayments finally determined.
                                - 3 -

for payments in reimbursement of Crocus’s direct expenses of

operating such shows.    We hold that petitioner is entitled to

deduct as additional business expenses the amounts of exhibition

fees paid to Crocus by exhibitors located in the former Soviet

Union and retained by Crocus as compensation for its services in

operating the foreign trade shows.

Factual Background

     In October 1990, Comtek Expositions, Inc. (petitioner), was

incorporated in Connecticut and commenced business.    At all

relevant times, petitioner has been a C corporation.    At the time

petitioner filed the petition in this case, its principal place

of business was in Wilton, Connecticut.    During the taxable

periods at issue, petitioner used the accrual method of

accounting.

     During the taxable periods at issue, petitioner’s

stockholders and their respective ownership interests were as

follows:

                                          Ownership
           Stockholder                    Percentage

           Aras Agalarov (Agalarov)         33.33
           Leonid Pollak (Pollak)           26.67
           Michael Tseytin (Tseytin)        26.67
           Boris Kogan (Kogan)              13.33

     The stockholders are parties to a stockholders’ agreement

(the stockholders’ agreement), which recites that petitioner has

issued and outstanding 200 shares of corporate stock held by the
                               - 4 -

four stockholders in amounts consistent with the stipulated

ownership percentages shown above.     However, the stockholders’

agreement contains some internal inconsistencies and

discrepancies with stipulated facts.     The first two lines of the

stockholders’ agreement recite that it is “dated as of this

day of    , 1993”; the month and date in 1993 are left blank.

The last two lines of the stockholders’ agreement prior to the

signatures recite “IN WITNESS WHEREOF, the parties have executed

this Agreement on the date first above written.”     Attached to the

stockholders’ agreement is an “Exhibit B, Certificate of Stated

Value” valuing the 200 shares of the corporation at $25,000 per

share--a total of $5,000,000--that is “Dated:     As of December,

31, 1992”.   Petitioner’s Forms 1120, U.S. Corporation Income Tax

Return, state that Agalarov and Kogan did not become stockholders

until August 1, 1993, or thereafter.3

     The stockholders’ agreement not only contains restrictions

on the transfer of shares, rights of first refusal, and purchase

options and obligations of the type usually found in agreements

among stockholders of closely held corporations; it also contains

provisions effectuating the stockholders’ and petitioner’s

expressed “desire to promote their mutual interest by agreeing


     3
      On petitioner’s Forms 1120, U.S. Corporation Income Tax
Return, for the taxable years ended July 31, 1992 and July 31,
1993, Pollak and Tseytin are each listed as owning 50 percent of
the shares of petitioner.
                               - 5 -

that the business and affairs of the corporation shall be

conducted subject to the terms and conditions hereof.”    Among the

actions that can be taken only by unanimous vote of the Board of

Directors are:   “(i) obligating the Corporation to participate in

any exhibition or exposition; * * * [and] (v) entering into any

extraordinary agreement or incurring any extraordinary expense

not in the usual and regular course of business * * *”.

     Article 10 of the stockholders’ agreement, entitled

“Agreement Regarding Revenues”, provides “that the ‘net profits’

(as defined herein)4 to the Corporation from its exhibition and

exposition operations shall be allocated to the Stockholders”

under three different scenarios, depending on where “the

exhibition or exposition takes place”.   Kogan’s percentage of net

profits under the three scenarios is always less than 20 percent

of net profits and equal to one-half of Pollak’s and Tseytin’s

percentages, which are always equal to each other.   Under the

three scenarios, Agalarov’s percentages of net profits vary to

include 50 percent of net profits for trade shows in the former

Soviet Union, 10 percent of net profits for trade shows in

Romania, and 20 percent of net profits for trade shows in the

United States.   The stockholders’ agreement does not refer to or


     4
      The last sentence of Article 10 of the stockholders’
agreement provides: “For purposes hereof, the term net profits
means the gross revenues from the operations of the Corporation
less all cost and expenses and taxes.”
                               - 6 -

otherwise reconcile the inconsistency between the percentages of

stock ownership, on the one hand, and the agreement for

allocations of percentages of net profits from trade shows to the

stockholders, on the other.   The stockholders’ agreement also

contains no provision for payment of the net profits of the trade

shows allocated to the stockholders, whether by payments as

dividend distributions with respect to stock, by payments of

compensation to stockholder-officers, or in some other fashion.

In any event, petitioner has never declared a dividend.   In

addition, Schedule E, Compensation of Officers, for each of

petitioner’s Forms 1120 in evidence for prior years, as well as

the taxable periods at issue, shows compensation paid to the

stockholder-officers as “None”.

     From 1990 through July 31, 1996, petitioner conducted trade

shows and exhibitions primarily in the former Soviet Union5 with

Crocus, a Russian joint-stock company solely owned by Agalarov.


     5
      The stipulation of facts states that foreign trade shows at
issue were conducted in former Soviet Bloc countries. We may
disregard stipulations between parties where justice requires if
the evidence contrary to the stipulation is substantial or the
stipulation is clearly contrary to facts disclosed by the record.
See Cal-Maine Foods, Inc. v. Commissioner, 93 T.C. 181, 195
(1989); Jasionowski v. Commissioner, 66 T.C. 312, 318 (1976).
The record discloses that all trade shows at issue in this case
were conducted in the former Soviet Union. Although trade shows
were also conducted in Romania, a former Soviet Bloc country that
was not part of the Soviet Union, the trade shows in Romania are
not at issue in this case. We therefore disregard the parties’
stipulation and find that foreign trade shows at issue in this
case were conducted in the former Soviet Union.
                               - 7 -

There is no express reference in the stockholders’ agreement to

Crocus or its role in putting on trade shows.

     From 1990 through July 31, 1996, Crocus’s business

activities included organizing, marketing, and presenting trade

shows and exhibitions in the former Soviet Union.   During this

period, Crocus also engaged in other unrelated business

activities.

     During 1994, 1995, and 1996, Crocus maintained offices in

Moscow; Crocus did not maintain an office or transact business in

the United States.   During 1994, 1995, and 1996, petitioner

maintained no office in Russia.

     Petitioner and Crocus leased exhibition space and facilities

for trade shows from Expocentr, a Russian joint-stock company.

Expocentr owned or controlled the Krasnaya Presnya exhibition

complex in Moscow where many trade shows were held.

     From 1990 through July 31, 1996, petitioner and Crocus had

no written agreement governing their business or financial

relationships.   At all times relevant, neither petitioner nor

Crocus controlled how the other conducted its business

activities.   At all times relevant, petitioner and Crocus were

free to compete against each other in the trade show business.

However, no foreign trade shows were organized by either

petitioner or Crocus unless both petitioner and Crocus agreed to

put on the trade show.
                               - 8 -

     Most of the exhibitors at the foreign trade shows were U.S.

companies, European subsidiaries of U.S. companies, and a few

Asian companies.   Some Russian companies also participated in the

foreign trade shows.   The foreign trade shows were usually

organized by product line, such as computers and computer

software, food, or clothing.

     Pre-January 1, 1995, Foreign Trade Shows

     Before January 1, 1995, petitioner would secure commitments

prior to the foreign trade shows from companies located in the

United States and elsewhere to lease space from petitioner at the

exhibition site to display their goods and services.

Petitioner’s employees attended other trade shows in the United

States and Europe to solicit exhibitors for foreign trade shows;

they also prepared sales brochures that were given to prospective

exhibitors and advertised proposed trade shows in trade journals.

Both the “Comtek” and “Crocus” names were used in the promotional

materials and advertising.

     Trade show exhibitors located outside the former Soviet

Union paid their exhibition fees either by check payable to

petitioner or by wire transfer to a bank account controlled by

petitioner.   Trade show exhibitors located in the former Soviet

Union paid their exhibition fees to Crocus.

     Trade show exhibitors located outside the former Soviet

Union entered into contracts for exhibition space with
                                - 9 -

petitioner.    These contracts were signed by a representative of

the exhibitor and a sales person employed by petitioner.     The

contracts provided that if the exhibitor were to cancel the

contract, petitioner would retain all payments received as

liquidated damages.

     Generally, petitioner’s employees handled all contacts with

potential trade show exhibitors located outside the former Soviet

Union.    In some cases, a potential exhibitor from outside the

former Soviet Union would instruct petitioner’s employees to

contact the exhibitor’s business agent in Russia; in such a case,

employees of Crocus would contact the business agent to see

whether that company wished to participate in the foreign trade

show.    However, in those cases, petitioner still collected the

exhibition fees.

     Crocus supplied some or all of the following services to

exhibitors at foreign trade shows:      Security (general, overnight,

and special); exhibit construction (including design assistance,

furniture assembly, and exhibition assembly and mounting);

exhibit maintenance and cleaning; exhibit demolition (including

exhibit dismantling, transportation, and storage); trade show

plumbing, electric, and telecommunications services (including

installation and connection of exhibit lighting, telephones, and

faxes); trade show exhibitor relations (including hotel and

automobile assistance); trade show food and beverages services;
                             - 10 -

trade show signs and flagging; local advertising and printing

(including exhibitor manuals and show catalogues); relations with

Expocentr; exhibition custom clearance; exhibition finance; and

first night party for exhibitors in the Kremlin.

     Petitioner’s employees attended foreign trade shows and

solicited exhibitors to participate in future trade shows.

Petitioner’s employees also provided liaison between exhibitors

and Crocus’s employees when exhibitors encountered problems.

     Foreign trade show fees received by petitioner were first

used to reimburse petitioner and Crocus for their direct expenses

and any overhead allocable to foreign trade shows.

     Post-December 31, 1994, Foreign Trade Shows

     On January 1, 1995, petitioner, Crocus, and MBL

International (MBL) entered into a reciprocal royalty agreement

(the royalty agreement) with E.C.I. Management Services, Ltd.

(ECI), a nonresident Irish corporation.6   In his declaration in

support of petitioner’s motion for summary judgment, Alexander

     6
      There is no stipulation of fact or any other information in
the record that identifies MBL. The royalty agreement does not
specify what role Crocus or MBL would play in putting on trade
shows or sharing trade show receipts and profits. Crocus’s and
MBL’s only role in the royalty agreement was to agree to a debt
offset provision. Article 4.7 of the royalty agreement recites
that MBL and Crocus are each indebted to Comtek, that Comtek is
indebted to ECI in the amounts set forth in Schedule A of the
royalty agreement, and that ECI accepts the obligations of MBL
and Crocus as “partial payment” of Comtek’s obligation to ECI.
The stated Schedule A amounts of the debts of MBL and Crocus to
Comtek, $3,791,183.80 and $1,576,574.42, respectively, exactly
equal Comtek’s stated debt to ECI, $5,367,758.22.
                               - 11 -

Bortzov (Bortzov), the deputy managing director of Crocus,

explained Crocus’s view of the business rationales behind the

royalty agreement.   Bortzov declared:

     9. By 1995, the existing arrangement was
     unsatisfactory to Crocus. Crocus was dissatisfied
     because it believed that Comtek was collecting
     exhibitor fees and using them to pay expenses of the
     United States trade shows and the United States
     operation before reimbursing Crocus for its expenses.

     10. Crocus also perceived that Comtek’s United States
     overhead allocations to the foreign Trade Shows were
     unreasonable considering the limited nature of the
     services provided by Comtek.

     11. Comtek, for its part, complained that it believed
     that Russian expenses were becoming too great a
     percentage of Trade Show receipts. Comtek’s United
     States’ shareholders accused Crocus of not using
     absolute best efforts to reduce Crocus direct expenses.

     12. Finally, Comtek never fully understood (a) how
     difficult it was to do business in Russia or (b) that
     dealing with quasi-government agencies in Russia is a
     sensitive mixture of politics, negotiation, and money.
     However, it was my understanding that everyone involved
     agreed that ECI’s participation in the Trade Shows
     would facilitate the conduct of the Trade Shows,
     including the allocation of space from Expocentr.

     13. Crocus recommended that Comtek and Crocus enter
     into an agreement with ECI to facilitate the conduct of
     future Russian Trade Shows.

     Like the stockholders’ agreement, the royalty agreement

contains internal inconsistencies and discrepancies with

stipulated facts.    First, Article 3.2 of the royalty agreement

designates ECI as “payment agent” to receive all payments of fees

for trade shows outside the United States, while all fees for

trade shows in the United States are to be remitted to
                              - 12 -

petitioner.   The royalty agreement says nothing about fees to be

collected by Crocus.   After December 31, 1994, trade show

exhibitors located outside the former Soviet Union either paid

their exhibition fees by check in U.S. currency payable to

petitioner or by wire transfer in U.S. currency to a bank account

in the name of ECI, while exhibitors located in the former Soviet

Union continued to pay their exhibition fees to Crocus.   During

the taxable periods at issue, i.e., January 1, 1995 through July

31, 1996, 90 percent of the fees for exhibition space at foreign

trade shows were paid by exhibitors located outside the former

Soviet Union, and the remaining 10 percent were paid by

exhibitors located in the former Soviet Union.7

     Second, under Article 4.1 of the royalty agreement, ECI

agrees to pay petitioner a royalty of 25 percent of gross

revenues of foreign trade shows, while under Article 4.2 of the

royalty agreement, petitioner agrees to pay ECI a royalty of 35

percent of gross revenues from trade shows in the United States

conducted after March 1, 1995.    Petitioner reported 25 percent of

gross revenues from foreign trade shows in accordance with

Article 4.1., except in cases where the foreign trade show was

conducted solely by petitioner.   Petitioner reported 100 percent

of gross revenues from trade shows in the United States conducted



     7
      The parties have not stipulated the relevant percentages
for foreign trade shows conducted before Jan. 1, 1995.
                              - 13 -

after March 1, 1995, which contradicts Article 4.2 of the royalty

agreement.

     Third, the royalty agreement contains a debt offset

provision pursuant to which ECI agrees to accept MBL’s and

Crocus’s debt obligations to petitioner as payment of

petitioner’s debt obligation to ECI.   The provision states that

petitioner’s obligation to ECI exceeds the amounts MBL and Crocus

owe petitioner.   However, Schedule A of the royalty agreement

states that the total of MBL’s and Crocus’s debts to petitioner

is exactly equal to petitioner’s debt to ECI.8

     During 1995 and 1996, the stockholders of ECI were Fallon

Nominees, Ltd. (Fallon), and Management Nominees, Ltd.

(Management).   Petitioner claims that none of its officers or

stockholders owns shares of or otherwise controls ECI, Fallon, or

Management or knows who owns or controls Fallon or Management.

John Fitzgerald, a director of ECI, declared in an exhibit to the

declaration of Frank Agostino (petitioner’s counsel) in support

of petitioner’s motion for summary judgment, that petitioner had

no direct or indirect control over ECI, and there was no identity

or overlap of ownership between petitioner and ECI.   However,

under Article VI of the royalty agreement, petitioner has rights

of first refusal over any of ECI’s stock that ECI intends to

assign, transfer, or dispose of.


     8
      See supra note 6.
                                - 14 -

     After December 31, 1994, petitioner and Crocus continued to

conduct trade shows and perform the underlying responsibilities

related thereto in the same general manner they had before

January 1, 1995.   Specifically, Crocus continued to supply some

or all of the same services to the exhibitors at foreign trade

shows as it had supplied to exhibitors at such shows conducted

before January 1, 1995.

     On August 8, 1995, petitioner and Crocus signed contracts

(the trade show contracts) with Expocentr to conduct three

foreign trade shows at pavilions owned by Expocentr.    The trade

show contracts evidence contractual terms with respect to leasing

pavilions owned by Expocentr.    Although Crocus was a party to

each trade show contract, under paragraph 9 of each of the trade

show contracts, petitioner alone would be responsible for final

settlement of accounts with Expocentr including remitting

payments for rent, insurance, and advances to Expocentr.     If

there was any balance owed to or any amount due from Expocentr,

petitioner alone was required to pay the balance or receive the

credit.   The trade show contracts do not refer to any joint

venture between any of the parties.

     On September 15, 1995, petitioner and Crocus signed a

cooperation agreement with Expocentr (the cooperation agreement)

that outlined their general understanding how future foreign

trade shows would be conducted in Expocentr pavilions.    The
                             - 15 -

cooperation agreement does not refer to any joint venture between

any of the parties.

     The total gross revenue from exhibition fees for the foreign

trade shows held during the last 7 months of the fiscal year

ended July 31, 1995, was $13,071,216, and for the foreign trade

shows held during the fiscal year ended July 31, 1996, was

$20,687,586.

     Lease payments were made to Expocentr totaling $3,143,873

for foreign trade shows held during the last 7 months of the

fiscal year ended July 31, 1995, and $7,003,947 for foreign trade

shows held during the fiscal year ended July 31, 1996.   Receipts

from foreign trade shows held from December 31, 1994 through July

31, 1996, were used to make these lease payments.

     Factoring in adjustments to gross receipts agreed to by

petitioner and respondent and disregarding receipts from trade

shows conducted solely by petitioner and from shows conducted

outside the former Soviet Union, foreign trade shows held from

December 31, 1994 through July 31, 1995, produced the following

net profit:

     Gross exhibition revenues                       $13,071,216
     Less: Crocus’s direct expenses substantiated      3,310,605
     Less: Expocentr rent payments substantiated       3,143,873
     Less: Petitioner’s direct expenses                2,345,509
       Net Profit                                      4,271,229

     Factoring in adjustments to gross receipts agreed to by

petitioner and respondent and disregarding receipts from trade
                             - 16 -

shows conducted solely by petitioner and from shows conducted

outside the former Soviet Union, foreign trade shows held during

the taxable year ended July 31, 1996, produced the following net

profit:

     Gross exhibition revenues                        $20,687,586
     Less: Crocus’s direct expenses substantiated       4,003,930
     Less: Expocentr lease payments substantiated       7,003,947
     Less: Petitioner’s direct expenses                 3,563,363
       Net Profit                                       6,116,346

     On its Federal income tax returns for the taxable years

ended July 31, 1995 and July 31, 1996, petitioner reported as

income 25 percent of gross receipts from foreign trade shows held

after December 31, 1994, in accordance with the royalty agreement

and deducted trade show expenses it incurred directly.    Taking

into account adjustments to gross receipts agreed to by

petitioner and respondent and disregarding receipts from foreign

trade shows conducted solely by petitioner and from trade shows

conducted outside the former Soviet Union, petitioner reported

net income of $922,295 from the stipulated $4,271,229 net profit

for foreign trade shows held from December 31, 1994 through July

31, 1995 (25 percent of gross revenues, amounting to $3,267,804,

minus petitioner’s direct expenses of $2,345,509) and net income

of $1,608,534 from the stipulated $6,116,346 net profit for

foreign trade shows held during the fiscal year ended July 31,

1996 (25 percent of gross revenues, amounting to $5,171,897,

minus petitioner’s direct expenses of $3,563,363).   In so doing,
                              - 17 -

petitioner did not deduct any expenses incurred by Crocus, nor

did petitioner deduct the lease payments for use of the Expocentr

pavilion or any other pavilion located in the former Soviet

Union.

     Petitioner and Crocus did not file Forms 1065, U.S.

Partnership Return of Income, for any taxable years ending on or

before July 31, 1996.   Crocus was not required to file and did

not file U.S. corporation income tax returns for the 1994, 1995,

and 1996 taxable years.

Procedural Background

     On February 8, 2000, respondent issued a notice of

deficiency to petitioner for the taxable years ended July 31,

1995 and July 31, 1996.   Respondent’s primary determination

germane to the issues in this case was that petitioner’s gross

income for the 7-month period ended July 31, 1995 and for the

fiscal year ended July 31, 1996, should be increased to include

the 75 percent of gross receipts that had been paid to or

received by ECI from petitioner and exhibitors in foreign trade

shows in accordance with Articles 3.2 and 4.1 of the royalty

agreement.   The petition and answer were timely filed.

     On January 2, 2001, respondent filed his first request for

admissions and attached exhibits; on January 31, 2001, petitioner

filed its first request for admissions.   Responses to the

respective first requests for admissions were filed by petitioner
                               - 18 -

on February 2, 2001, and by respondent on February 26, 2001.

Both parties admitted that the Internal Revenue Service (IRS) was

pursuing a criminal investigation of petitioner’s stockholders.9

Petitioner believed the investigation may have been related to

its stockholders’ relationships with ECI or its owners.

Petitioner’s stockholders interposed their Fifth Amendment

privilege to respondent’s discovery requests of petitioner.

Consequently, petitioner asserted it had insufficient information

to either admit or deny certain of respondent’s requests for

admissions.

     On February 2, 2001, respondent filed his application for a

letter of request authorizing a foreign deposition under the

United Kingdom Evidence (Proceedings in Other Jurisdictions) Act

1975 to preserve foreign-based bank records of Barclays Bank PLC

relating to an account held in the name of ECI and to discern the

identity of ECI’s owners.10   On February 5, 2001, petitioner

filed its objection to respondent’s application for a foreign

deposition.   On February 8, 2001, the Court granted respondent’s

application for a letter of request authorizing a foreign


     9
      The record does not disclose whether the IRS has completed
its criminal investigation of petitioner’s stockholders.
     10
      Respondent claims ECI is a foreign corporation that
conceals its business operations and its beneficial owners. John
Fitzgerald, a director of ECI, declared petitioner has no direct
or indirect control over ECI and there is no identity or overlap
of ownership between petitioner and ECI. Petitioner also claimed
that none of its officers or stockholders knows who owns or
controls ECI.
                              - 19 -

deposition.   For reasons not disclosed by the parties, respondent

did not proceed with the foreign deposition.

     On February 8, 2001, petitioner filed its motion for summary

judgment.   Petitioner’s position in the motion for summary

judgement was that respondent could not ignore ECI’s separate

legal existence and include in petitioner’s gross income amounts

paid to ECI by petitioner and exhibitors in foreign trade shows

in accordance with Articles 3.2 and 4.1 of the royalty agreement.

     On November 20, 2001, the parties submitted the case to the

Court fully stipulated under Rule 122 in a document entitled

“First Stipulation of Facts” that included not only stipulations

of fact and attached exhibits, but also stipulations of settled

issues, the opposing contentions of the parties, and a set of

ground rules to be observed by the Court in deciding the case as

the parties have presented it.11

     In three separate paragraphs, the stipulation of facts

document sets forth the opposing contentions and the ground rules

as follows:

          12. * * * Petitioner alleges that Crocus and it
     orally agreed to a 50-50 split of the net profits from
     the trade shows held in Russia and in the other former
     Soviet Bloc countries. * * *

                *    *    *    *    *    *     *

          20. Before January 1, 1995, * * * The net
     profits, if any, [of foreign trade shows after


     11
      The parties have not submitted any additional or
supplemental stipulation of facts.
                        - 20 -

reimbursement to petitioner and Crocus of their direct
expenses and overhead allocable to foreign trade shows]
were * * * divided either equally between petitioner
and Crocus (petitioner’s position) or between Aras
Agalarov (50%) and the other three shareholders of
Comtek (50%) (respondent’s position).

          *    *    *    *    *    *    *

     27. The parties stipulate that both ECI and the
royalty agreement should be disregarded for federal
income tax purposes. Respondent concedes that if the
foreign trade show receipts are treated as gross income
received by petitioner, then petitioner is entitled to
deduct the foreign trade show expenses that were paid
from the trade show receipts treated as gross income to
the extent that such expenses have been substantiated
* * *. This would include trade show expenses paid by
ECI directly and trade show expenses Crocus paid for
which it was reimbursed through ECI. The parties agree
that no adverse inference should be drawn against
either of them based on the ECI [royalty] agreement.
The parties agree that the Court may characterize the
relationship between petitioner and Crocus vis-a-vis
the foreign trade shows based solely on this
Stipulation of Facts and the Exhibits attached hereto
and the opposing party’s admissions filed in this case.
The parties reserve the right to object on relevancy
grounds to any proposed finding of fact based on the
admissions.

     The sole issue in dispute is how Crocus and
petitioner should report the income generated by the
foreign trade shows. Petitioner contends that, if the
ECI [royalty] agreement is ignored, then it and Crocus
were joint venturers in the foreign trade shows during
the years at issue and that the trade show profit
should be divided either equally (i.e., 50% petitioner,
50% Crocus) or that profits should be allocated based
on each party’s payment of trade show expenses. If the
Court finds that petitioner and Crocus were engaged in
a joint venture during the years at issue and that they
agreed to split equally the net profits from the
foreign trade show business, respondent concedes that
such an allocation of the net profits would have
"substantial economic effect" under I.R.C. § 704(b)(2).
Alternatively, if the Court determines that petitioner
must report all of the gross receipts, then petitioner
contends that it is entitled to a deduction for the 50%
                                - 21 -

     profit allegedly paid to Crocus by ECI from the trade
     show receipts. Respondent contends that petitioner
     must report all the trade show income, less trade show
     expenses paid by Crocus and ECI, and is not entitled to
     reduce net income for any profit split with Crocus.
     Respondent further contends that petitioner has not
     produced sufficient evidence that it and Crocus were
     ever engaged in a joint venture or ever agreed that
     there should be a split of the net profits from the
     foreign trade shows.

     On January 16, 2002, the Court deemed moot petitioner’s

motion for summary judgment because the parties had stipulated

that both ECI and the royalty agreement should be disregarded for

Federal income tax purposes.

Discussion

     Petitioner has the burden of showing that the determinations

in the notice of deficiency are erroneous.    Rule 142(a); Welch v.

Helvering, 290 U.S. 111, 115 (1933).12    That this case has been

submitted fully stipulated does not obviate petitioner’s burden

of proof.    Rule 122(b).   We are mindful of the teaching of Burnet

v. Houston, 283 U.S. 223, 228 (1931), that difficulties of proof




     12
      Sec. 7491(a), in certain instances, places the burden of
proof on respondent with respect to examinations of returns
commencing after July 22, 1998. Both petitioner and respondent
agreed that “In 1998 Revenue Agent Lois Petzig of the
Connecticut-Rhode Island District was assigned to the audit of
Comtek’s 1994 and 1995 tax returns.” Since there is no evidence
in the record regarding the exact date in 1998 the examination of
petitioner’s returns commenced, and since petitioner has at no
time contended that the provisions of sec. 7491(a) are
applicable, the burden of proof remains on petitioner. See
Estate of Fung v. Commissioner, 117 T.C. 247, 253 (2001).
                                - 22 -

do not relieve the taxpayer from the need to satisfy its burden

of proof.

     Income is taxed to the person who earned it.    Lucas v. Earl,

281 U.S. 111 (1930).   The sole issue in dispute is how petitioner

should report taxable income generated by foreign trade shows

held after December 31, 1994.    According to the stipulation of

the parties and the terms of the royalty agreement, petitioner

was supposed to receive 25 percent of gross receipts and pay its

direct expenses out of these receipts, and ECI was supposed to

receive the remaining 75 percent of gross receipts and make

payments to Crocus and to Expocentr and other pavilion lessors in

the former Soviet Union.   Inasmuch as the parties have stipulated

that the royalty agreement is to be disregarded for Federal

income tax purposes, the question is whether petitioner is

entitled to exclude or deduct from gross income of foreign trade

shows conducted after December 31, 1994, any amounts in excess of

Crocus’s and petitioner’s direct expenses and Expocentr rent

payments, which, the parties have stipulated, petitioner is

entitled to deduct in computing its taxable income for the

periods at issue.

     Petitioner contends Comtek and Crocus were in a joint

venture or a series of joint ventures to conduct the foreign

trade shows during the taxable periods at issue.    Petitioner

further contends that joint venture profits should be split
                              - 23 -

between petitioner and Crocus in proportion to their respective

direct expenses, or failing that, the net profits should be split

equally.

     If the Court should hold there was no joint venture and

therefore include in petitioner’s income all gross revenue from

foreign trade shows, petitioner requests a deduction under

section 162(a)(1)–-in addition to its stipulated deductions for

its direct expenses, Expocentr rent payments, and Crocus’s

reimbursed direct expenses--for amounts paid or payable to Crocus

as a markup on Crocus’s direct expenses as additional

compensation for Crocus’s services in operating the foreign trade

shows.   Petitioner argues that the Court should estimate the

markup under the Cohan rule (Cohan v. Commissioner, 39 F.2d 540,

543-544 (2d Cir. 1930)) and requests that the markup equal at

least 50 percent of net profits.   Under either argument,

petitioner requests the Court to allocate to each of petitioner

and Crocus at least $2,135,614.50 (50 percent of $4,271,229 net

profit) for the last 7 months of the fiscal year ended July 31,

1995, and at least $3,058,173 (50 percent of $6,116,346 net

profit) for the fiscal year ended July 31, 1996.

     Respondent argues that petitioner and Crocus did not conduct

any joint venture during the taxable periods at issue.

Respondent contends Crocus should not receive any markup as

compensation for its services because Crocus was the alter ego of
                              - 24 -

Agalarov.   Instead, respondent urges us to disregard the

corporate entities of petitioner and Crocus and view the

transactions at the stockholder level, in accordance with Article

10 of the stockholders’ agreement, under which petitioner’s net

profits of foreign trade shows conducted in the former Soviet

Union are allocated 50 percent to Agalarov, with the other 50

percent split between Pollak, Tseytin, and Kogan.13   Under

respondent’s theory, all gross receipts and expenses should be

allocated to petitioner, which would leave petitioner with net

profit of $4,271,229 for the last 7 months of the fiscal year

ended July 31, 1995, and net profit of $6,116,346 for the fiscal

year ended July 31, 1996.

     We hold there was no joint venture between petitioner and

Crocus in conduct of foreign trade shows during the taxable

periods at issue.   We interpret the parties’ stipulation of facts

to find that the foreign trade show fees paid to Crocus by

exhibitors located in the former Soviet Union have been included

in petitioner’s stipulated gross income; we also find that Crocus

retained such fees.   We hold that petitioner is entitled under

section 162(a)(1) to deduct such fees collected and retained by

Crocus as compensation for the services of Crocus in operating

the foreign trade shows.

     13
      In so doing, respondent disregards the provisions of Art.
10 of the stockholders’ agreement that provide different
allocations for the U.S. and Romanian trade shows of 20 and 10
percent, respectively.
                                - 25 -

     Before setting forth the reasoning to support our holdings,

we make some preliminary observations, all having to do with the

artificial situation created by the parties’ stipulation to

disregard the royalty agreement and ECI and the accompanying

obscurity, lack of transparency, and incompleteness of the

stipulated record regarding the business and financial

relationships of petitioner and Crocus during the taxable periods

at issue.

     First, there is a significant omission from the stipulation

of facts.14   Unlike the stipulation with respect to foreign trade

shows conducted before January 1, 1995, which states that

petitioner reimbursed Crocus for its direct expenses and its

overhead expenses, the stipulation of facts states that if

petitioner must report all of the gross receipts from foreign

trade shows conducted after December 31, 1994, petitioner is

entitled to deduct “trade show expenses Crocus paid for which it

was reimbursed through ECI.”    The stipulation of facts does not

define “trade show expenses”.    Petitioner failed to substantiate

that Crocus was reimbursed for its overhead expenses.    The

stipulation of facts states the amounts of Crocus’s “direct

     14
      If we should hold that petitioner and Crocus were engaged
in a joint venture or joint ventures and agreed that net profits
should be allocated between them in the same proportion as
payments of foreign trade show expenses, the parties have not
expressly stipulated that such allocation would have substantial
economic effect. This omission is academic, inasmuch as we have
concluded that petitioner and Crocus did not engage in a joint
venture or joint ventures.
                              - 26 -

expenses substantiated” that may be deducted from gross income by

petitioner; the amounts of Crocus’s overhead expenses are not

included in the stipulation of facts.

     Second, in their briefs, petitioner and respondent each

argue that net profits for foreign trade shows conducted after

December 31, 1994, should be split in the same way net profits

for pre-January 1, 1995, foreign trade shows were split.

Paragraph 20 of the stipulation of facts states that petitioner

contends that any net profits of pre-January 1, 1995, foreign

trade shows were divided equally between petitioner and Crocus,

whereas respondent contends that Crocus received nothing more

than the reimbursement of its direct expenses and overhead.

Respondent contends that petitioner received all net profits from

pre-January 1, 1995, foreign trade shows, which were divided at

the stockholder level of petitioner with Agalarov entitled to 50

percent of such net profits and the remaining 50 percent divided

between Pollak, Tseytin, and Kogan.    In addition, petitioner

contends that it and Crocus orally agreed to an equal split of

net profits from foreign trade shows conducted from 1990 to 1996.

     Unlike the stipulations with respect to foreign trade shows

conducted during the taxable periods at issue, the record does

not provide enough information regarding the amount of net

profits for the periods before January 1, 1995, to resolve the

contentions of the parties.   Petitioner and respondent did not
                              - 27 -

present business and financial records for the periods before

January 1, 1995, that state how petitioner reported fees

collected by Crocus from exhibitors located in the former Soviet

Union and the amount or percentage of fees collected by Crocus

from such exhibitors.   Also, the record does not disclose

information regarding payments for leasing exhibition space in

the former Soviet Union during these periods.    Petitioner has

provided no documentary or testimonial evidence that petitioner

and Crocus had orally agreed to an equal split of net profits

from pre-January 1, 1995, foreign trade shows.

     Petitioner’s and respondent’s opposing contentions with

respect to revenue or profit sharing between petitioner and

Crocus or Agalarov for periods before January 1, 1995, are not

agreed facts; instead they pose a hypothetical issue that might

have a bearing on this case if we were prepared to make

inferences about whether and how petitioner and Crocus would have

agreed to alter their pre-January 1, 1995, business arrangements.

     We do not resolve the disagreement between petitioner and

respondent about whether and how petitioner and Crocus agreed to

split net profits for pre-January 1, 1995, foreign trade shows.

The record fails to provide evidence to resolve the respective

contentions of petitioner and respondent, and resolution of this

issue is not a prerequisite to our resolution of the case.
                              - 28 -

     Third, agreeing in the stipulation of facts to disregard the

royalty agreement and ECI for Federal income tax purposes, the

parties have left the Court with an incomplete picture of the

business and financial relationships of petitioner and Crocus

during the taxable periods at issue.   The problem has been

aggravated by respondent’s unexplained failure to follow through

with discovery after the Court granted respondent’s application

for a letter of request authorizing a foreign deposition.

     Against the background of the declaration in support of

petitioner’s motion for summary judgment “that dealing with

quasi-government agencies in Russia is a sensitive mixture of

politics, negotiation, and money,” we follow the direction of

paragraph 27 of the stipulation of facts to disregard any

suspicions raised by the use of a tax haven jurisdiction as the

locus for the royalty agreement to which petitioner became a

party,15 by the criminal investigation16 and the invocation by

petitioner’s stockholders of their Fifth Amendment privilege,17

     15
      The Republic of Ireland was regarded by respondent as a
tax-haven jurisdiction during the taxable periods at issue. See
1 Audit, Internal Revenue Manual (CCH), sec. 4233, Exhibit 500-8,
at 9509.
     16
      Cf. Capital Video Corp. v. Commissioner, 311 F.3d 458 (1st
Cir. 2002), affg. T.C. Memo. 2002-40.
     17
      Because of the invocation of the Fifth Amendment privilege
by petitioner’s stockholders, petitioner has not provided
relevant information with respect to the business and financial
relationships between petitioner, ECI, and Crocus. An invocation
of the Fifth Amendment is not a substitute for relevant evidence,
                                                   (continued...)
                              - 29 -

and by Crocus’s status as a foreign entity whose financial

records have not been made part of the record.18

     We interpret the parties’ stipulated instruction not to draw

any adverse inference against either of them from the disregarded

royalty agreement with ECI as a direction not to apply the rule

of Wichita Terminal Elevator Co. v. Commissioner, 6 T.C. 1158,

1165 (1946), affd. on other grounds 162 F.2d 513 (10th Cir. 1947)

against either of them, despite the lack of relevant record

evidence they did not show was not within their power to produce.

We further interpret the parties’ stipulated instruction not to

draw adverse inferences as being primarily for the protection of

petitioner and as directed primarily to what might be otherwise

justified suspicions generated by the existence and terms of the

royalty agreement in the first place, not by the stipulation of




     17
      (...continued)
and a litigant claiming the privilege is not freed from adducing
proof in support of a proposition on which he has the burden of
proof. United States v. Rylander, 460 U.S. 752, 758 (1983);
United States v. 4003-4005 5th Ave., 55 F.3d 78, 83 (2d Cir.
1995). Petitioner’s failure to present sufficient evidence is
not excused by the invocation of the Fifth Amendment privilege by
its stockholders.
     18
      This is another of those cases in which we “have sought to
delineate a path through the thicket of problems which inhere in
a situation where the liability of a U.S. taxpayer is related to
information in the hands of a foreign entity and access to that
information involves the attitude of that foreign entity and the
application of the laws of a foreign country.” Gerling Intl.
Ins. Co. v. Commissioner, 98 T.C. 640, 646-648 (1992), on remand
from 839 F.2d 131 (3d Cir. 1988), revg. and remanding 87 T.C. 679
(1986), supplementing 86 T.C. 468 (1986).
                                - 30 -

the parties to disregard the royalty agreement and ECI for the

purposes of this case.

Issue 1. Whether Petitioner and Crocus Were Engaged in a Joint
Venture or Joint Ventures To Conduct Foreign Trade Shows During
January 1, 1995 to July 31, 1996

     Whether there is a partnership for tax purposes is a matter

of Federal, not local, law.19   Commissioner v. Tower, 327 U.S.

280, 287-288, (1946); Estate of Kahn v. Commissioner, 499 F.2d

1186, 1188 (2d Cir. 1974), affg. Grober v. Commissioner, T.C.

Memo. 1972-240; Beck Chem. Equip. Corp. v. Commissioner, 27 T.C.

840, 849 (1957).   “[T]he term ‘partnership’ includes a syndicate,

group, pool, joint venture, or other unincorporated organization

through or by means of which any business, financial operation,

or venture is carried on, and which is not * * * a corporation or

a trust or estate.”   Secs. 761(a), 7701(a)(2).   The principles

used to determine whether there is a partnership for Federal tax

purposes are equally applicable to determine whether there is a

joint venture for Federal tax purposes.   Sierra Club, Inc. v.

Commissioner, 103 T.C. 307, 323 (1994), affd. in part and revd.

in part on other grounds 86 F.3d 1526 (9th Cir. 1996); Luna v.




     19
      Neither petitioner nor respondent has addressed whether
petitioner and Crocus engaged in a partnership or joint venture
under Russian law. Because the record provides no information or
evidence with respect to the subject of partnerships or joint
ventures under Russian law, we apply U.S. tax law to determine
whether petitioner and Crocus conducted foreign trade shows as a
joint venture.
                              - 31 -

Commissioner, 42 T.C. 1067, 1077 (1964); Beck Chem. Equip. Corp.

v. Commissioner, supra at 848-849.

     The required inquiry for determining the existence of a

partnership for Federal income tax purposes is whether the

parties “really and truly intended to join together for the

purpose of carrying on business and sharing in the profits or

losses or both.”   Commissioner v. Tower, supra at 287.   Their

intention is a matter of fact, “to be determined from testimony

disclosed by their ‘agreement, considered as a whole, and by

their conduct in execution of its provisions.’”   Id. at 287

(quoting Drennen v. London Assurance Co., 113 U.S. 51, 56

(1885)).

     In Commissioner v. Culbertson, 337 U.S. 733, 742 (1949), the

Supreme Court elaborated on this standard and stated that there

is a partnership for Federal tax purposes when

     considering all the facts--the agreement, the conduct
     of the parties in execution of its provisions, their
     statements, the testimony of disinterested persons, the
     relationship of the parties, their respective abilities
     and capital contributions, the actual control of income
     and the purposes for which it is used, and any other
     facts throwing light on their true intent--the parties
     in good faith and acting with a business purpose
     intended to join together in the present conduct of the
     enterprise. [Fn. ref. omitted.]

     In Luna v. Commissioner, supra at 1077-1078, this Court

distilled the principles mentioned in Commissioner v. Tower,

supra, and Commissioner v. Culbertson, supra, to set forth the

following factors as relevant in evaluating whether parties
                              - 32 -

intend to create a partnership for Federal income tax purposes

(the Luna factors):

     the agreement of the parties and their conduct in
     executing its terms; the contributions, if any, which
     each party has made to the venture; the parties’
     control over income and capital and the right of each
     to make withdrawals; whether each party was a principal
     and coproprietor, sharing a mutual proprietary interest
     in the net profits and having an obligation to share
     losses, or whether one party was the agent or employee
     of the other, receiving for his services contingent
     compensation in the form of a percentage of income;
     whether business was conducted in the joint names of
     the parties; whether the parties filed Federal
     partnership returns or otherwise represented to
     respondent or to persons with whom they dealt that they
     were joint venturers; whether separate books of account
     were maintained for the venture; and whether the
     parties exercised mutual control over and assumed
     mutual responsibilities for the enterprise.

See also Estate of Kahn v. Commissioner, supra at 1189.

     None of the Luna factors is conclusive of the existence of a

partnership.   Burde v. Commissioner, 352 F.2d 995, 1002 (2d Cir.

1965), affg. 43 T.C. 252 (1964); McDougal v. Commissioner, 62

T.C. 720, 725 (1974).   We apply each Luna factor to the

stipulated facts of this case to determine whether petitioner and

Crocus engaged in a joint venture to conduct foreign trade shows

during the taxable periods at issue.

     1. The Agreement of the Parties and Their Conduct in
Executing Its Terms

     Petitioner admits there was no written agreement between

petitioner and Crocus to operate foreign trade shows as a joint

venture.   However, petitioner argues that the trade show
                              - 33 -

contracts and the cooperation agreement with Expocentr are

written documents that evidence a joint venture.

     The trade show contracts evidence contractual terms with

respect to leasing pavilions owned by Expocentr.   Under paragraph

9 of each of the trade show contracts, petitioner alone was

obligated to pay rent and other fees for the use of the

pavilions.   The trade show contracts do not refer to any joint

venture between any of the parties.    Similarly, the cooperation

agreement merely reflects a general understanding with Expocentr

as to how future trade shows would be conducted in Expocentr

pavilions; it says nothing about a joint venture between

petitioner and Crocus.

     Although the parties have agreed to disregard the royalty

agreement for Federal income tax purposes, petitioner argues that

the royalty agreement is a formal agreement to enter into a joint

venture.   However, the royalty agreement contains no provisions

that refer to a business relationship between petitioner and

Crocus or to any agreement that provides Crocus with a share of

the profits.   In form, the royalty agreement provides for a

division of gross receipts between petitioner and ECI.

     Petitioner argues that evidence of a joint venture agreement

can be found in the stipulated fact that before January 1, 1995,

no foreign trade shows were organized unless both petitioner and

Crocus agreed to put on the trade show.   However, this does not
                              - 34 -

prove the existence of an agreement to join in a joint venture to

share profits or losses or both as required by Commissioner v.

Tower, 327 U.S. 280 (1946).   Rather, it reflects a continuation

of the prior understanding or course of dealing between

petitioner and Crocus to have their resources available at

specific times and places to conduct foreign trade shows.

     The existence or lack of a written agreement is not

determinative of whether a joint venture existed between

petitioner and Crocus.   Sierra Club v. Commissioner, 103 T.C. at

324; Cohen v. Commissioner, 15 T.C. 261, 272 (1950) (The absence

of an express agreement to share in losses is not material, since

such an agreement may be implied from their agreement to share

profits).   In Beck Chem. Equip. Corp. v. Commissioner, 27 T.C.

840 (1957), we found there was a joint venture on the basis of an

oral agreement between the parties.

     Even though petitioner claims there was an oral agreement

between petitioner and Crocus to an equal split of net profits

from foreign trade shows conducted from 1990 to 1996, petitioner

has not introduced any documentary or testimonial evidence of the

existence of any such alleged oral agreement.   Petitioner has

provided no evidence to show that it and Crocus did in fact split

net profits equally.
                                - 35 -

     This Luna factor weighs against the finding of a joint

venture between petitioner and Crocus during the taxable periods

at issue.

     2. The Contributions, If Any, Which Each Party Has Made to
the Venture

     Petitioner and respondent agree that both petitioner and

Crocus made significant contributions to foreign trade shows.

This Luna factor supports the finding of a joint venture between

petitioner and Crocus during the taxable periods at issue.

     3. The Parties’ Control Over Income and Capital and the
Right of Each To Make Withdrawals

     Petitioner and Crocus did not have mutual or joint control

over capital and income generated by foreign trade shows.

During the taxable periods at issue, petitioner or ECI collected

and controlled fees from exhibitors located outside the former

Soviet Union, which accounted for 90 percent of all foreign trade

show fees, and Crocus collected and controlled fees from

exhibitors located in the former Soviet Union, which accounted

for the remaining 10 percent of all foreign trade show fees.

Nothing in the record indicates that Crocus had control over or a

right to make withdrawals or to receive distributions or payments

from the share of receipts collected by petitioner and ECI during

the taxable periods at issue.    Crocus is only a party to the

royalty agreement between petitioner, Crocus, and ECI with

respect to an offset of a debt.    Nothing in the royalty agreement
                                - 36 -

or the parties’ stipulation indicates that Crocus was entitled to

receive a share of net profits from the 75 percent of gross

receipts to be paid to ECI.20

     Petitioner negotiated all contracts with exhibitors located

outside the former Soviet Union, which accounted for 90 percent

of fees collected for foreign trade shows.   If an exhibitor were

to cancel a contract with petitioner, petitioner would retain all

payments received as liquidated damages.21   Nothing in the record

indicates Crocus was entitled to receive any potential liquidated

damages retained by petitioner.

     This Luna factor weighs against the finding of a joint

venture between petitioner and Crocus during the taxable periods

at issue.

     4. Whether Each Party Was a Principal and Coproprietor,
Sharing a Mutual Proprietary Interest in the Net Profits and
Having an Obligation to Share Losses, or Whether One Party Was
the Agent or Employee of the Other, Receiving For His Services
Contingent Compensation in the Form of a Percentage of Income

     There is no evidence petitioner and Crocus had an agreement

to share or did in fact share in the net profits or losses of

foreign trade shows.   We infer from the stipulated facts

     20
      However, the stipulation does indicate that ECI did in
fact reimburse Crocus for its direct expenses during the taxable
periods at issue.
     21
      Neither Exhibit 7-J, a sample copy of a contract with an
exhibitor, nor the royalty agreement indicate whether payments
retained by petitioner as liquidated damages would be paid or
remitted to ECI in accordance with ECI’s right under Arts. 3.2
and 4.1 of the royalty agreement to receive 75 percent of the
gross receipts from foreign trade shows.
                              - 37 -

regarding the total gross revenues from foreign trade shows

during the periods at issue and the 10 percent thereof received

by Crocus from exhibitors located in the former Soviet Union that

Crocus retained fees collected from such exhibitors as

compensation for its services in operating the foreign trade

shows.

     The owner of a business may agree to compensate a hired

manager or key employee with a percentage of the income of the

business, or a broker may be retained to sell property for a

commission based on the net or gross sales price.   Even though

both arrangements may culminate in a division of profits, neither

constitutes a partnership unless the arrangement results in the

parties’ becoming coproprietors.

     In Luna v. Commissioner, 42 T.C. 1067 (1964), we held there

was no partnership where the taxpayer was to receive a percentage

of the renewal commissions from an insurance policy he had

designed in exchange for his management services to the insurance

company.   In so holding, we focused on the following:   That

neither the taxpayer nor the insurance company in any way

indicated, prior to the suit, an intent to join together as

partners; partnership tax returns were not filed, and neither

party held itself out to others as a joint venturer with the

other party; the taxpayer was not authorized to engage in the

insurance business except as an agent selling insurance policies;
                              - 38 -

and the taxpayer and the insurance company would not and did not

share in any losses resulting from the sale of the new type of

policy.

     Disregarding ECI and the royalty agreement, petitioner is

the only party with a proprietary interest in the

profit-producing activity of promoting and operating the foreign

trade shows during the periods at issue.   Crocus’s retention of

fees collected from exhibitors located in the former Soviet Union

does not, by itself, result in a joint venture.   It may fairly be

inferred from the stipulated record that Crocus was reimbursed

for its direct expenses only, not its overhead expenses.   See

supra pp. 25-26.   Although Crocus was subject to the risk of loss

of its unreimbursed overhead expenses, Crocus’s risk of loss is

trivial as compared with petitioner’s risk of loss arising from

its liability for the substantial Expocentr rent obligations in

addition to its own direct expenses.   The facts as a whole

suggest Crocus was not a coproprietor because it did not share in

possible losses of substantial Expocentr rent obligations or

petitioner’s direct expenses, did not negotiate the trade show

contracts or cooperation agreement with Expocentr and contracts

with exhibitors located outside the former Soviet Union, and did

not own any rights to foreign trade show profits.

     This Luna factor weighs against the finding of a joint

venture between petitioner and Crocus during the taxable periods

at issue.
                               - 39 -

     5.   Whether Business Was Conducted in the Joint Names of the
Parties

     The evidence with respect to this Luna factor is mixed.     One

trade catalogue listed both petitioner and Crocus as the

producers and managers of the trade show; another catalogue

listed petitioner as the producer and manager of the trade show

and listed Crocus as the marketer of the trade show in the former

Soviet Union.   Advertisements in English direct exhibitors to

contact petitioner for information on exhibiting in future trade

shows.    The trade show catalogues contain letters from officers

of both petitioner and Crocus thanking exhibitors for attending

the trade shows.   Overall, trade show catalogues do not

conclusively suggest to third parties that business was conducted

in the joint names of Comtek and Crocus.

     Both petitioner and Crocus signed the trade show contracts

and cooperation agreement with Expocentr.   However, under the

three trade show contracts in evidence, petitioner alone was

obligated to pay rent and other fees for the use of the

pavilions.    Crocus is involved in none of the proposals for

future cooperation between petitioner and Expocentr.    These

contracts suggest that petitioner was the principal party in

negotiations with Expocentr.

     This Luna factor is neutral with respect to whether

petitioner and Crocus engaged in a joint venture during the

taxable periods at issue.
                                - 40 -

     6. Whether the Parties Filed Federal Partnership Returns or
Otherwise Represented to Respondent or to Persons With Whom They
Dealt That They Were Joint Venturers

     Under section 6031 and section 1.6031-1(c) and (d), Income

Tax Regs., every partnership engaged in trade or business, or

having income from sources within the United States was required

to file a partnership return.    Petitioner and Crocus did not file

partnership returns for the taxable periods at issue.   It is not

clear from the record whether petitioner and Crocus conducted

foreign trade shows as a joint venture engaged in trade or

business, or having income from sources, within the United

States.   The purpose of this Luna factor is to determine whether

petitioner and Crocus represented to respondent that they

conducted foreign trade shows as a joint venture.   In deciding

this issue, it is not necessary to determine whether petitioner

and Crocus were required to file a partnership return under

section 6031 and section 1.6031-1(c) and (d), Income Tax Regs.

     Regardless of whether petitioner and Crocus were required to

file a partnership return, neither petitioner nor Crocus

represented to respondent that they conducted foreign trade shows

during the taxable periods at issue as a joint venture.    On its

returns for the taxable periods at issue, petitioner did not

explain or state that it was engaged in a partnership with any

entity; petitioner merely reported its share of gross income from

foreign trade shows in accordance with the royalty agreement.

There is no other evidence or document in the record that
                               - 41 -

suggests petitioner or Crocus represented to respondent that they

conducted foreign trade shows as a joint venture.

     The evidence indicates that petitioner represented to the

great majority of exhibitors that it conducted foreign trade

shows independently with no partner.    Petitioner itself

negotiated and entered into all contracts with exhibitors located

outside the former Soviet Union, which accounted for 90 percent

of trade show fees.    If an exhibitor were to cancel a contract

with petitioner, petitioner was entitled to retain all payments

received as liquidated damages.    Nothing in the record indicates

Crocus was entitled to receive any potential liquidated damages

retained by petitioner.   At all foreign trade shows, petitioner’s

employees solicited exhibitors for future shows and provided

liaison between exhibitors and Crocus’s employees, thus

indicating to the exhibitors that petitioner was in charge of the

foreign trade shows.

     Even though both petitioner and Crocus were parties to the

cooperation agreement and trade show contracts with Expocentr,

petitioner alone was obligated to pay rent and other fees for the

use of the pavilions, and petitioner was the principal party in

negotiations with Expocentr for the future use of pavilions.

These contracts suggest that petitioner and Crocus did not

represent themselves as a partnership or as joint venturers to

Expocentr.
                               - 42 -

       This Luna factor weighs against the finding of a joint

venture between petitioner and Crocus during the taxable periods

at issue.

     7. Whether Separate Books of Account Were Maintained for
the Venture

       There is no evidence that separate books of account were

maintained for a joint venture between petitioner and Crocus.

Receipts, expenses, and other items with respect to foreign trade

shows during the taxable periods at issue are recorded in

petitioner’s trial balances.    However, the trial balances provide

no indication that profits or losses were split between

petitioner and Crocus.    The record contains no corresponding

trial balances for Crocus.

       This Luna factor weighs against the finding of a joint

venture between petitioner and Crocus during the taxable periods

at issue.

     8. Whether the Parties Exercised Mutual Control Over and
Assumed Mutual Responsibilities for the Enterprise

       Each party was responsible for paying its trade show

expenses.    Crocus was reimbursed for all its direct expenses by

ECI.    While both parties assumed mutual responsibilities for

conducting the trade shows, there is no evidence Crocus had any

control over the 90 percent of trade show receipts collected by

petitioner and ECI.    Under the contracts with Expocentr,

petitioner was solely responsible for payments of rent for

leasing pavilions.    If an exhibitor located outside the former
                                - 43 -

Soviet Union canceled a contract, petitioner alone could retain

liquidated damages.

     This Luna factor weighs against the finding of a joint

venture between petitioner and Crocus during the taxable periods

at issue.

     Six of the eight Luna factors weigh against the finding of a

joint venture; one Luna factor is neutral; and one Luna factor

supports the finding of joint venture.    Applying the various Luna

factors, with no one factor being conclusive, we hold there was

no joint venture between petitioner and Crocus to operate foreign

trade shows during the taxable periods at issue.

     We reach the same result using an overall or “gestalt”

approach.   Whether a joint venture exists depends ultimately on

the intent of the parties.     Commissioner v. Culbertson, 337 U.S.

733 (1949); Commissioner v. Tower, 327 U.S. 280 (1946).    The

trier of fact is to ascertain the parties’ intent by “considering

all the facts--the agreement, the conduct of the parties in

execution of its provisions * * * and any other facts throwing

light on their true intent”.    Commissioner v. Culbertson, supra

at 742;   Burde v. Commissioner, 352 F.2d at 1002.

     Considering all the facts and circumstances of this case

that the parties have seen fit to reveal, we find that petitioner

and Crocus did not intend to join together in the conduct of a

joint venture or ventures to share profits or losses.    Crocus was

reimbursed for its trade show expenses by ECI; there is no
                              - 44 -

evidence Crocus shared in the 25 percent of gross receipts

allocated to and reported by petitioner under the royalty

agreement.   It was petitioner who conducted the trade show

business in the United States, Russia, and elsewhere in Europe.

Crocus’s role was limited to assisting with the logistics of

setting up and conducting the trade shows in the former Soviet

Union and obtaining a few Russian exhibitors for those shows.

     Although the “parties agree that no adverse inference should

be drawn against either of them based on the ECI [royalty]

agreement,” the parties have neither filled nor illuminated the

“black hole” that results from their removal of the royalty

agreement and ECI from the picture.    The removal of the royalty

agreement and ECI does not uncover a subsisting joint venture or

series of joint ventures between petitioner and Crocus.

     We hold there was no joint venture between petitioner and

Crocus to operate foreign trade shows during the taxable periods

at issue.

Issue 2. In the Alternative, Whether and in What Amounts
Petitioner Is Entitled to Additional Business Expense Deductions
for the Taxable Periods at Issue, for Amounts Paid or Payable to
Crocus as Compensation for Its Services in Operating the Foreign
Trade Shows

     Petitioner argues in the alternative that we should find

that Crocus was entitled to a markup on its direct expenses as

compensation for its services in operating the foreign trade

shows.   Petitioner claims a compensation deduction under section

162(a)(1) for amounts paid or payable to Crocus as a markup.
                                - 45 -

Petitioner argues that we should estimate a markup paid or

payable to Crocus as compensation for its services equivalent to

50 percent of the net profits for foreign trade shows held during

the taxable periods at issue.    Specifically, petitioner asks us

to allocate Crocus a markup of $2,135,614.50 (50 percent of

$4,271,229 net profit) for foreign trade shows conducted during

the last 7 months of the fiscal year ended July 31, 1995, and

$3,058,173 (50 percent of $6,116,346 net profit) for foreign

trade shows conducted during the fiscal year ended July 31, 1996.

     Respondent asks us to disregard the corporate entities of

petitioner and Crocus.   Respondent views their transactions at

the stockholder level, in accordance with Article 10 of the

stockholders’ agreement, under which petitioner’s net profits of

foreign trade shows are to be allocated 50 percent to Agalarov,

and the other 50 percent split between Pollak, Tseytin, and

Kogan.   Respondent argues that petitioner should not be allowed a

markup to Crocus because Crocus was the alter ego of Agalarov who

should receive his share of 50 percent of the net profits under

the stockholders’ agreement.    Specifically, respondent asks us to

allocate all gross receipts and expenses to petitioner, which

would leave it with net profit of $4,271,229 for the last 7

months of the fiscal year ended July 31, 1995, and net profit of

$6,116,346 for the fiscal year ended July 31, 1996.   In

respondent’s view, Agalarov would then be allocated 50 percent of

the net profits to be paid to him as a dividend, with the
                                - 46 -

remaining profits allocated to and retained on behalf of the

other three stockholders.

     Petitioner argues that the stockholders’ agreement was

superseded by the royalty agreement.     Respondent argues that the

stockholders’ agreement continues in effect and determines the

split of net profits.

     We reject both petitioner’s and respondent’s arguments.    We

reject respondent’s argument because a corporate entity generally

will not be disregarded for tax purposes so long as it is formed

for a substantial business purpose or actually engages in a

business activity after its formation.     Moline Props., Inc. v.

Commissioner, 319 U.S. 436, 439 (1943); O’Neill v. Commissioner,

170 F.2d 596, 598 (2d Cir. 1948), affg. a Memorandum Opinion of

this Court dated Aug. 8, 1947; Recklitis v. Commissioner, 91 T.C.

874, 892 (1988).   On the other hand, when a corporation is not

formed for any significant, nontax business purpose, and does not

engage in any substantive business activity, its existence will

be disregarded for tax purposes, even though it may be validly

incorporated under State law.    Recklitis v. Commissioner, supra;

Noonan v. Commissioner, 52 T.C. 907, 910 (1969), affd. 451 F.2d

992 (9th Cir. 1971).    In Natl. Carbide Corp. v. Commissioner, 336

U.S. 422, 433 (1949), the Supreme Court refused to disregard the

existence of a corporation even though it stated:    “Undoubtedly

the great majority of corporations owned by sole stockholders are

‘dummies’ in the sense that their policies and day-to-day
                              - 47 -

activities are determined not as decisions of the corporation but

by their owners acting individually.”

     There is no evidence, nor has respondent directly argued,

that the separate entity status of petitioner or Crocus should be

disregarded.   The stockholders’ agreement is simply an agreement

between stockholders to split petitioner’s net profits in

percentages that vary from the stockholders’ stock ownership

percentages.   We reject petitioner’s argument that the

stockholders’ agreement is superseded by the royalty agreement

because there is no evidence that the stockholders have ever

rescinded the stockholders’ agreement or declared it invalid.

Although we agree with respondent that the stockholders’

agreement is still valid and in effect, it does not prove that

petitioner or Crocus acted in such a way that their separate

corporate status should be disregarded.   Petitioner and Crocus

were formed for substantial nontax business purposes and engaged

in business activities, including conducting and providing

services for trade shows.   Petitioner, not its stockholders,

conducted trade shows in the United States and the former Soviet

Union.   Crocus, not Agalarov, performed services in helping

petitioner put on foreign trade shows.    Third parties, including

Expocentr and exhibitors, transacted business with petitioner and

Crocus, not their stockholders.   Petitioner never declared or

paid dividends to any of its stockholders, and there is no
                                 - 48 -

evidence petitioner distributed profits under the stockholders’

agreement to Agalarov or the other stockholders.

     We see no evidence that petitioner and Crocus were formed

for purely tax avoidance purposes.        Petitioner’s stockholders

subjected themselves to two layers of U.S. income tax by forming

petitioner as a separate corporate entity to conduct trade shows.

It would not have been efficient, in the tax or economic sense,

for petitioner to pay Agalarov for his services by declaring a

dividend or making a distribution subject to double taxation.

Rather, petitioner could receive a deduction from gross revenues

either by paying Agalarov directly as an employee or by paying

Crocus directly.     Inasmuch as Crocus is a separate entity from

petitioner, it is highly unlikely that Crocus would have

performed services at foreign trade shows for nothing more than

the reimbursement of its direct expenses.        Although the disclosed

arrangements between petitioner and Crocus are opaque, we see

nothing in them that would justify the stretch respondent asks

the Court to indulge in.     We see no reason to disregard the

separate corporate status of petitioner or Crocus.

     Petitioner argues that Crocus should be allocated at least

50 percent of net profits reported in the stipulation of facts

because Crocus paid more than 50 percent of the total foreign

trade show expenses paid by petitioner and Crocus.22       Also,


     22
          Petitioner’s argument disregards Expocentr rent payments,
                                                       (continued...)
                              - 49 -

according to Bortzov, Crocus was dissatisfied with the pre-

January 1, 1995, business arrangement.

     There is no evidence Crocus received, had any control over,

or had rights to make withdrawals from the 90 percent of trade

show receipts collected by petitioner and ECI.    Petitioner’s

argument is undermined by the fact that Crocus did not bear the

burden of its direct expenses because those expenses were

reimbursed.   Petitioner provided no information about the

financial records of Crocus and ECI to substantiate its argument

for a greater deduction or higher allocation of net profits to

Crocus as a compensation deduction.    We therefore reject

petitioner’s request to allocate to Crocus 50 percent or more of

the net profits reported in the stipulation of facts.23


     22
      (...continued)
which are allocable to petitioner. If Expocentr rent payments
are included in the total expenses for foreign trade shows,
Crocus’s share of such expenses is less than 38 percent for the
last 7 months of the fiscal year ended July 31, 1995, and less
than 27 percent for the fiscal year ended July 31, 1996.
     23
      We shall not accede to petitioner’s request that we use
sec. 482 to allocate income between petitioner and Crocus because
we find that petitioner and Crocus were not controlled or owned
by the same interests as required for the application of sec.
482. Control for sec. 482 purposes includes “any kind of
control, direct or indirect, whether legally enforceable or not,
and however exercisable or exercised * * *.” It is the reality
of the control which is decisive, not its form or the mode of its
exercise. A presumption of control arises if income or
deductions have been arbitrarily shifted.” Sec. 1.482-1(i)(4),
Income Tax Regs.; see also B. Forman Co. v. Commissioner, 453
F.2d 1144, 1152-1153 (2d Cir. 1972), affg. in part and revg. in
part 54 T.C. 912 (1970). Although Agalarov owned 100 percent of
Crocus, he owned only 33.33 percent of petitioner. Agalarov did
                                                   (continued...)
                              - 50 -

     Section 162(a)(1) allows as a deduction all the ordinary and

necessary expenses paid or incurred during the taxable year in

carrying on any trade or business, including a reasonable

allowance for salaries or other compensation for personal

services actually rendered.

     Petitioner has presented no financial records of the

business operations of ECI and Crocus.   The incompleteness of the

record has been aggravated by respondent’s unexplained failure to

follow through with discovery after the Court granted

respondent’s application for a letter of request authorizing a

foreign deposition.   The stipulated facts in this case present a

mysterious world where real-life agreements are disregarded,

financial records are nowhere to be found, and a myriad of other

relevant information is absent.   Although both petitioner and

respondent have agreed that disregarding the royalty agreement

and ECI should not have an adverse effect on either party, the

“black hole” surrounding the financial operations of ECI and

Crocus has impaired our ability to understand the business and

financial relationships of petitioner and Crocus.




     23
      (...continued)
not control the vote of petitioner’s Board of Directors because
he was one of three directors. There is no evidence in the
record that Agalarov controlled petitioner’s business decisions.
Thus, we do not find that petitioner and Crocus were owned or
controlled by the same interests for purposes of applying sec.
482.
                              - 51 -

     In the stipulation of facts, “the parties agree that the

Court may characterize the relationship between petitioner and

Crocus vis-a-vis foreign trade shows based solely on this

Stipulation of Facts and the Exhibits attached hereto and the

opposing party’s admissions filed in this case.”   The stipulated

record provides substantial evidence that Crocus performed

significant and substantial services in operating the foreign

trade shows.   Inasmuch as Crocus is a separate entity from

petitioner, it is highly unlikely that Crocus would have

performed services at foreign trade shows for nothing more than

the reimbursement of its direct expenses.   We are mindful of the

admonition of Judge Learned Hand in Commissioner v. Maresi, 156

F.2d 929, 931 (2d Cir. 1946), affg. 6 T.C. 582 (1946), that “The

one sure way to do injustice in such cases is to allow nothing

whatever upon the excuse that we cannot tell how much to allow.”

See also Gerling Intl. Ins. Co. v. Commissioner, 98 T.C. 640, 659

(1992).   Doing the best we can with the gap-riddled record the

parties have created, we find that fees collected by Crocus

during the taxable periods at issue from exhibitors located in

the former Soviet Union were retained by Crocus as compensation

for its services in operating the foreign trade shows.   Inasmuch

as it may fairly be inferred and we do find that such fees have

been included in petitioner’s gross income under the stipulation
                             - 52 -

of the parties, petitioner is entitled to deduct the amount of

such fees from its gross income under section 162(a)(1).24

     There is no evidence to suggest that ECI’s reimbursements to

Crocus were reduced by the fees collected by Crocus.   There is no

evidence to suggest Crocus remitted such fees to either ECI or

petitioner.

     We find that fees collected by Crocus during the taxable

periods at issue from exhibitors located in the former Soviet

Union were retained by Crocus.   We also find that fees collected

and retained by Crocus from exhibitors domiciled in the former

Soviet Union were available to pay Crocus’s overhead expenses

with respect to foreign trade shows.

     Unlike the inherently vague stipulation of facts for pre-

January 1, 1995, foreign trade shows, petitioner and respondent

stipulated “the total gross revenues from exhibition fees for

foreign trade shows” conducted during the taxable periods at

issue to be included in petitioner’s gross income.   It may fairly

be inferred from the stipulation that “total gross revenues from

exhibition fees for foreign trade shows” includes fees collected


     24
      We reject petitioner’s argument that the Court should
allocate Crocus a markup on its direct expenses as compensation
for its services and that such markup should be estimated under
the Cohan rule (Cohan v. Commissioner, 39 F.2d 540, 543-544 (2d
Cir. 1930)). We shall not attempt to estimate Crocus’s
compensation under the Cohan rule because the stipulated record
provides enough information to calculate the exact amount of fees
collected by Crocus from exhibitors located in the former Soviet
Union and retained by Crocus as compensation for its services in
operating the foreign trade shows.
                              - 53 -

and retained by Crocus from exhibitors located in the former

Soviet Union.

     Our conclusion is consistent with and confirmed by the

notion that Crocus would also be entitled to compensation for

operating the foreign trade shows under common law principles of

agency and quantum meruit.   Section 441 of the Restatement

(Second), Agency (1958) states:

     Unless the relation of the parties, the triviality of
     the services, or other circumstances, indicate that the
     parties have agreed otherwise, it is inferred that a
     person promises to pay for services which he requests
     or permits another to perform for him as his agent.

A plaintiff may recover “in quantum meruit ‘to assure a just and

equitable result,’ * * * where ‘the defendant received a benefit

from the plaintiff’s services under circumstances which, in

justice, preclude him from denying an obligation to pay for

them’”.   Rule v. Brine, Inc., 85 F.3d 1002, 1011 (2d Cir. 1996)

(quoting Bradkin v. Leverton, 26 N.Y.2d 192, 196 (1970); see also

Restatement, Restitution, sec. 112 (1937)).

     Petitioner requested and received Crocus’s services in

helping petitioner conduct foreign trade shows.   Respondent

acknowledges Crocus’s services were substantial and significant.

Because Crocus’s sole owner, Agalarov, owns only a 33.33-percent

minority interest in petitioner, petitioner and Crocus are not

sufficiently related to assume Crocus would provide its services

to petitioner for nothing more than the reimbursement of its

direct expenses, and there is no evidence to suggest otherwise.
                                 - 54 -

     It may fairly be inferred from the stipulated record that

petitioner requested Crocus’s services because Crocus had the

expertise and support staff necessary to conduct trade shows in

the former Soviet Union.     The services provided by Crocus were

necessary to operate the foreign trade shows.     Crocus was also

responsible for relations with exhibitors located in the former

Soviet Union, including collecting fees from such exhibitors.       It

may fairly be inferred that one purpose of the foreign trade

shows was to increase mutual contacts and provide networking

opportunities for exhibitors located outside the former Soviet

Union to establish business relationships with companies in the

former Soviet Union.     Although fees collected from exhibitors

located in the former Soviet Union accounted for only 10 percent

of all trade show receipts, the attendance of such exhibitors at

foreign trade shows no doubt increased networking opportunities

for exhibitors located outside the former Soviet Union, thereby

making the trade shows more attractive to them.

     Because services provided by Crocus were essential to

conduct and increase the profitability of the foreign trade

shows, it may fairly be inferred that petitioner or ECI made

arrangements for Crocus to receive some payment for its services

in addition to the reimbursement of its direct expenses of

operating the foreign trade shows.25


     25
          It might be objected that Crocus’s right to compensation
                                                       (continued...)
                              - 55 -

     Crocus’s compensation consisted of a portion of the gross

revenues from foreign trade shows, which was contingent on the

amount of fees Crocus collected from exhibitors located in the

former Soviet Union.   For foreign trade shows conducted during

the last 7 months of the fiscal year ended July 31, 1995,

Crocus’s compensation of 10 percent of gross revenues amounted to

$1,307,122 (10 percent of gross revenues of $13,071,216).   For

foreign trade shows conducted during the fiscal year ended July

31, 1996, Crocus’s compensation of 10 percent of gross revenues

amounted to $2,068,759 (10 percent of gross revenues of

$20,687,586).   Petitioner is entitled to deduct the amount of

such fees collected by Crocus during the taxable periods at issue

from exhibitors located in the former Soviet Union as reasonable

compensation to Crocus for its services in operating the foreign

trade shows.


     25
      (...continued)
would have to be established under the laws of the place of
performance, in this case Russia. See Restatement (Second),
Conflict of Laws, sec. 221 (1971). The issue in this case is not
whether Crocus has a right to recover payments of compensation
from petitioner under theories of agency or restitution. Rather,
we must decide whether petitioner or ECI paid Crocus for its
services from net profits of foreign trade shows. The laws of
Russia or other foreign countries with respect to notions of
agency or restitution are not relevant in deciding whether
petitioner or ECI had a compensation arrangement with Crocus.
Our discussion of Crocus’s rights to compensation under common-
law principles of agency and restitution is simply meant to
refute respondent’s argument that Crocus worked on foreign trade
shows for nothing more than the reimbursement of its direct
expenses with no understanding that it would be entitled to a
markup to be applied to its overhead and the possibility of
making a profit.
                              - 56 -

     The result of our holdings is that petitioner is entitled to

deduct 30.6 percent and 33.8 percent, respectively, of the

stipulated net profits of the foreign trade shows for the 7

months ended July 31, 1995, and the fiscal year ended July 31,

1996, as compensation to Crocus.

     In summary, we hold that petitioner and Crocus were not

engaged in a joint venture during the taxable periods at issue;

petitioner must therefore report all revenues from foreign trade

shows collected by petitioner or ECI during the taxable periods

at issue.   Petitioner may deduct its direct expenses, the

Expocentr rent expenses, and Crocus’s reimbursed direct expenses,

all in accordance with the stipulation of the parties.

Petitioner is also entitled to deduct the amount of fees

collected by Crocus during the taxable periods at issue from

exhibitors located in the former Soviet Union as reasonable

compensation to Crocus for its services in operating the foreign

trade shows.

     To give effect to the foregoing,

                                         Decision will be entered

                                    under Rule 155.
