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the corporation, that shareholder did not change the percentage
once he obtained control.
In reaching our conclusion, we considered that, “Though the
officers were also shareholders of the petitioner, they are
entitled to reasonable compensation for services actually
rendered." Good Chevrolet v. Commissioner, supra (citing
Commercial Iron Works v. Commissioner, 166 F.2d 221, 224 (5th
Cir. 1948)). Contingent compensation paid pursuant to a free
bargain between the parties before services are rendered should
be allowed as a deduction even though in the actual working out
of the contract it may prove to be greater than the amount that
would ordinarily be paid. Sec. 1.162-7(b)(3), Income Tax Regs.
The arrangement also may result in lesser compensation in less
successful years. Finally, we noted “this is not a case in which
the controlling officers annually draw all, or virtually all, of
the profits of the business in the form of bonuses." Good
Chevrolet v. Commissioner, supra; cf. Boyle Fuel Co. v.
Commissioner, 53 T.C. 162, 171 (1969); see Owensby & Kritikos,
Inc. v. Commissioner, T.C. Memo. 1985-267, affd. 819 F.2d 1315
(5th Cir. 1987) (the contracts did not create a situation where
virtually all of the taxable income was paid out as
compensation). We concluded that compensation paid to
shareholder-employees constituting approximately 60 percent of
net income was reasonable. Good Chevrolet v. Commissioner,
supra.
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