-16-
Whether an expenditure that is claimed as a section 162(a)(1)
deduction is reasonable is a factual question that must be decided
considering all the facts and circumstances. Pacific Grains, Inc.
v. Commissioner, 399 F.2d 603, 605 (9th Cir. 1968), affg. T.C. Memo.
1967-7; Estate of Wallace v. Commissioner, 95 T.C. 525, 553 (1990),
affd. 965 F.2d 1038 (11th Cir. 1992). Petitioner bears the burden
to show that it is entitled to a compensation deduction larger than
that allowed by respondent. Rule 142(a); Welch v. Helvering, 290
U.S. 111, 115 (1933); Nor-Cal Adjusters v. Commissioner, 503 F.2d
359, 361 (9th Cir. 1974), affg. T.C. Memo. 1971-200. Should
petitioner prove respondent’s determination incorrect, then we must
decide the proper amount of reasonable compensation based upon the
entire record. Pepsi-Cola Bottling Co. v. Commissioner, 61 T.C.
564, 568 (1974), affd. 528 F.2d 176 (10th Cir. 1975).
Courts consider numerous factors when determining the
reasonableness of compensation. The U.S. Court of Appeals for the
Ninth Circuit, to which an appeal in this case would lie, uses the
five-factor test enumerated in Elliotts, Inc. v. Commissioner, supra
at 1245-1248: (1) The employee’s role in the company; (2) a
comparison of the compensation paid to the employee with the
compensation paid to similarly situated employees in similar
companies; (3) the character and condition of the company; (4)
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