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reasonable allowance for * * * compensation for personal services
actually rendered". There is no dispute between the parties that
the amount was "reasonable".
The Government challenges the argument that the reversion
was paid to Mr. Souris as compensation. It contends that the
reversion, being gross income to the corporation, was paid to Mr.
Souris as a constructive dividend, which, although representing
taxable income to Mr. Souris, was not deductible by the
corporation. And the Government relies upon the well-established
line of cases holding that to be deductible as compensation the
payment must be "made with the intent to compensate". Paula
Constr. Co. v. Commissioner, 58 T.C. 1056, 1058 (1972), affd.
without published opinion 474 F.2d 1345 (5th Cir. 1973); King's
Court Mobile Home Park, Inc. v. Commissioner, 98 T.C. 511, 514
(1992). The argument is superficially persuasive here since the
payment was not reported by Mr. Souris as compensation; he
instead described the payment merely as a "reversion". However,
the argument falls apart upon further reflection. As was
indicated above, Mr. Souris obviously, but mistakenly, reported
4(...continued)
deduction all the ordinary and necessary
expenses paid or incurred during the taxable
year in carrying on any trade or business,
including--
(1) a reasonable allowance for salaries
or other compensation for personal
services actually rendered;
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