42
We conclude that on balance all the factors favor allowing
only as much deductible compensation for Mr. Munro as Mr. Brennan
and respondent have conceded is reasonable. We therefore hold
that Pertinax was entitled to deduct $300,000 for compensation
paid to Mr. Munro, but no more. Cf. Guy Schoenecker, Inc. v.
Commissioner, T.C. Memo. 1995-539. We thus sustain a
disallowance of $700,112 in the deduction claimed by Pertinax for
compensation payments to Mr. Munro.
Issue 4. Management Service Fees Paid by Alondra and Edco
We have held that businesses can deduct management and
consulting fees under section 162(a)(1) only to the extent that
they were paid for services actually rendered. Huber v.
Commissioner, T.C. Memo. 1984-593. What matters is the nature of
the services performed, and not the label put on them by the
payor and the payee. Id. Petitioners bear the burden of proving
what portion of the fees is allocable to deductible expenses.
Id.
In these cases, petitioners have established that Pertinax
performed management services for the corporate partners.
However, they have not carried their burden of establishing the
extent to which the total of $1,249,518 alleged to have been paid
to Pertinax by corporate petitioners was in payment for such
services. The bulk of the $906,879 disallowed to Alondra by
respondent might well be presumed to consist of the $900,000
challenged by respondent. Aside from a bare statement that the
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