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was due to an increase in inventory value because of capitalizing
a portion of officers' compensation for petitioner's fiscal year
1990. Respondent further determined that petitioner was liable
for an accuracy-related penalty pursuant to section 6662(a).
OPINION
Section 162(a)(1) provides for the deduction of all the
ordinary and necessary expenses paid or incurred in the carrying
on of a trade or business, including a reasonable allowance for
compensation for personal services actually rendered. Whether
the compensation is reasonable compensation is a question of
fact. Estate of Wallace v. Commissioner, 95 T.C. 525, 553
(1990), affd. 965 F.2d 1038 (11th Cir. 1992). Some of the
factors to be considered in determining the reasonableness of
compensation of an employee are: (1) The employee's role in the
company; (2) a comparison of the employee's salary with salaries
paid by similar companies for similar services; (3) the character
and condition of the company; (4) whether the relationship
between the employee and the company is such as to permit the
company to disguise nondeductible corporate distributions of
profits as deductible compensation; and (5) the internal
inconsistency of a company's treatment of payments to employees.
Elliotts, Inc. v. Commissioner, 716 F.2d 1241, 1245-1247 (9th
Cir. 1983), revg. and remanding T.C. Memo. 1980-282.
The employee's role in the company requires a consideration
of the position held by the employee, the number of hours worked
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