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Elliot Pisem and David E. Kahen Elliot Pisem and David E. Kahen

The label assigned to a payment may not be respected in determining U.S. income tax consequences, if, based on the surrounding facts and circumstances, the label is inconsistent with the substance. Aspro v. Commissioner (TC Memo 2021-8) illustrates how application of this principle can result in disallowance of claimed deductions (in that case, for millions of dollars of management fees) and underscores issues that should be considered in designing arrangements to compensate enterprise owners or related parties for their services.

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