- 18 -
assume it was, and we limit our discussion to the other two
prongs, and we pass on these prongs seriatim.
1. Whether the Compensation Paid by Petitioner Was Reasonable
a. Overview
Reasonable compensation is determined by comparing the
compensation paid to an employee with the value of the services
that he or she performed in return. Such a determination is made
with respect to each employee individually, rather than with
respect to the compensation paid to all employees collectively.
Such a determination is a question of fact. RTS Inv. Corp. v.
Commissioner, 877 F.2d 647, 650 (8th Cir. 1989), affg. per curiam
T.C. Memo. 1987-98; Charles Schneider & Co. v. Commissioner,
500 F.2d 148, 151 (8th Cir. 1974), affg. T.C. Memo. 1973-130;
Mayson Manufacturing Co. v. Commissioner, 178 F.2d 115, 119
(6th Cir. 1949), revg. and remanding a Memorandum Opinion of this
Court; Estate of Wallace v. Commissioner, 95 T.C. 525, 553
(1990), affd. 965 F.2d 1038 (11th Cir. 1992). Respondent's
determination is presumed correct, and petitioner must prove it
wrong. Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115
(1933); RTS Inv. Corp. v. Commissioner, supra at 650.
The cases concerning reasonable compensation are legion and
list many factors to be considered in making this factual
determination. The factors which may be considered, none of
which is controlling in itself, include: (a) The employee's
Page: Previous 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 NextLast modified: May 25, 2011