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the services were rendered the parties understood them to be part
of a business transaction conducted for profit.” Id.
Petitioners allege that Quest provided valuable investment,
financial, and management consulting services to Norcom over an
extended period of time. Petitioners further allege that in 1995
and 1996 they paid reasonable compensation to Quest for these
services. Respondent takes the position that (1) Norcom lacked
the requisite compensatory intent; and (2) the payments do not
constitute reasonable compensation because petitioners failed to
establish the extent of the services rendered. We disagree with
respondent.
Intent To Compensate
The evidence strongly supports petitioners’ contention that
they intended to compensate Quest for services rendered when they
made the $1 million payment in 1995 and the $700,000 payment in
1996. The Court finds it especially significant that both
payments were initially negotiated by officers of Norcom and
Quest who did not hold any ownership interest in either company.
Specifically, Mr. Espy, chief operating officer of Quest,
approached Mr. Rahn, president of Norcom, with the suggestion
that Norcom compensate Quest for services rendered, whereupon
Messrs. Espy and Rahn negotiated the amount of the payments. The
Court sees no reason to second-guess payments that were
negotiated by two disinterested members of the management teams
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