45
deduction of $35,671 for wages and salaries. However, the record
shows that Pertinax paid wages and salaries amounting to $982,740
to 41 employees other than Mr. Munro, and the numbers for those
employees are reasonable.22 In addition, we have just held that
reasonable compensation for Pertinax to pay Mr. Munro was
$300,000. These figures add up to $1,282,740.
We do not know the relative shares of this total paid by
Alondra, UCIC, and Edco.23 However, we conclude, using the rule
of Cohan v. Commissioner, 39 F.2d 540, 544 (2d Cir. 1930), and
the sales figures available for 1987, that of this $1,282,740,
UCIC paid $412,016, Alondra $838,448, and Edco $32,276.
With respect to Edco, we note that respondent has disallowed
all of Edco's $35,671 deduction for salaries and wages, even
though the parties have stipulated that Edco had three employees.
Even though the stipulation does not say whether or not they were
full time, or represented an allocation between Edco and the
other corporate partners, this determination is obviously wrong.
We uphold Edco's $35,671 deduction in full.
Of the $884,148 that Alondra apparently paid to Pertinax for
wages, we uphold $838,448 and disallow the remaining $45,700.
22If we divide this figure of $982,740 by 41, the number of
Pertinax's employees other than Mr. Munro, we reach an average
annual compensation of $23,969. When we take into account that
this figure includes the executive salaries for Messrs. Clearman
and Brewer, this average looks eminently reasonable.
23The statutory notice sent to UCII disallowed $294,408,
apparently UCII's total deduction for management fees--wages for
1987.
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