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salaries, they do not exceed reasonable compensation for the
services rendered. Rapco, Inc. v. Commissioner, T.C. Memo. 1995-
128; sec. 1.162-9, Income Tax Regs.
Extraordinary, unusual, and extravagant amounts paid by a
corporation to its officers as purported compensation for their
services, but having no substantial relation to the measure of
their services and being disproportionate to their value, are not
in reality payments for services; they are not regarded as
"ordinary and necessary expenses" within the meaning of section
162(a)(1) merely because the payments are made in accordance with
an agreement between the corporation and its officers. Botany
Worsted Mills v. United States, 278 U.S. 282, 292 (1929).
Contingent compensation agreements can be upheld and
compensation paid under them held to be deductible under
appropriate circumstances. Automotive Inv. Dev., Inc. v.
Commissioner, T.C. Memo. 1993-298; North Carolina Equip. Co. v.
Commissioner, a Memorandum Opinion of this Court dated June 4,
1945. However, we expressly stated in Automotive Inv. Dev., Inc.
v. Commissioner, supra, that even the contingent compensation
formula there approved might in other circumstances result in
compensation that is unreasonable under section 162(a)(1).
Compensation, even under a contingent compensation formula, is in
any case limited to what is reasonable under all the
circumstances, which is in general such amount as would
ordinarily be paid for like services by like enterprises under
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