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for its fiscal year 1989, $296,816 for its fiscal year 1990, and
$338,475 for its fiscal year 1991. Accordingly, respondent
disallowed the balance of the compensation claimed to be
deductible by GSI and subsidiaries for Mr. Schoenecker in each of
these years.
OPINION
Section 162(a)(1) allows as a deduction a reasonable
allowance for salaries or other compensation paid for personal
services rendered. In order to be deductible, the amount must be
paid for services rendered and not a substitute for dividends,
and must be reasonable for the services rendered. Charles
Schneider & Co. v. Commissioner, 500 F.2d 148, 152 (8th Cir.
1974), affg. T.C. Memo. 1973-130. The Schneider case, citing
Mayson Manufacturing Co. v. Commissioner, 178 F.2d 115, 119 (6th
Cir. 1949), lists the following factors that are often considered
in determining the reasonableness of compensation: (1) The
employee's qualifications; (2) the nature, extent, and scope of
the employee's work; (3) the size and complexities of the
business; (4) a comparison of salaries paid with the employer's
gross income and net income; (5) the prevailing general economic
conditions; (6) a comparison of salaries with distributions to
stockholders; (7) the prevailing rates of compensation for
comparable positions in comparable concerns; (8) the salary
policy of the taxpayer as to all employees; and (9) in the case
of small corporations with a limited number of officers, the
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