Summit Sheet Metal Co. - Page 15

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               Respondent determined a deficiency in petitioner's income              
          tax of $307,671 for 1987.  Respondent’s determination is presumed           
          to be correct, and petitioner bears the burden of proving                   
          otherwise.  Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115              
          (1933).                                                                     
          B.   Whether Petitioner Paid Unreasonable Compensation to its               
               Officers in the Year in Issue                                          
               Petitioner contends that it deducted an unreasonable amount            
          for officers’ compensation for the year in issue.  Petitioner               
          contends that a total of no more than $421,938 is reasonable                
          compensation for its three officers.  Respondent contends that              
          the compensation petitioner paid and deducted ($618,295) was                
          reasonable.                                                                 
               1.   Whether All of the Compensation Was Paid for Services             
                    Provided to Petitioner                                            
               A corporation may deduct "a reasonable allowance for                   
          salaries or other compensation for personal services actually               
          rendered".  Sec. 162(a)(1).  Reasonable compensation must be                
          purely for services provided to the company which provides the              
          compensation.  Elliotts, Inc. v. Commissioner, 716 F.2d 1241,               
          1243 (9th Cir. 1983), revg. and remanding T.C. Memo. 1980-282;              
          sec. 1.162-7(a), Income Tax Regs.                                           
               Petitioner contends that Searing and Hanson spent a                    
          substantial amount of time in the years in issue working for                







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