Dq 12. corporation p owns 85 percent of the outstanding stock of corporation r. this year, employees of corporation r performed extensive management services for corporation p. in return for the services, corporation p paid a $250,000 fee to corporation r, which corporation p reported as a deductible business expense.
a. is the consulting arrangement an arm's-length transaction?
b. if the irs challenges the validity of corporation p's deduction, what facts might the corporation offer as evidence of the validity of the payment?
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