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part, an attempt to recoup from petitioner part of the payments Mr.
Leonard had made pursuant to his divorce settlement.
We are also mindful that high compensation is more reasonable
when there is a corresponding lack of fringe benefits such as
pension plans or stock options which might normally be expected.
Rutter v. Commissioner, 853 F.2d 1267, 1274 (5th Cir. 1988), affg.
T.C. Memo. 1986-407. In these situations, an employer may pay more
compensation than it would have paid had it offered a pension or
profit sharing plan. Petitioner did not have any type of
retirement plan.
Here, on the one hand there was no formal, consistent
compensation program, and the 1987 bonus was partially an attempt
to recoup from petitioner part of the payments Mr. Leonard had made
pursuant to his divorce settlement; on the other hand, the
compensation was paid, in part, to correct prior undercompensation
and to rectify the absence of a pension plan. Accordingly, this
factor is neutral.
Amount of Reasonable Compensation
Having thoroughly considered the evidence, and in light of the
factors enunciated by the U.S. Court of Appeals for the Ninth
Circuit, we conclude that petitioner paid excessive compensation to
Mr. Leonard in fiscal year 1987. However, in light of the value of
11(...continued)
change this conclusion.
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