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OPINION
A. Deductions for Management Fees
1. Contentions of the Parties
A taxpayer may deduct payments for management services under
section 162 if the payments are for services actually rendered
and are reasonable in amount. American Sav. Bank v.
Commissioner, 56 T.C. 828, 842-843 (1971). This question is
decided based on a consideration of all of the facts and
circumstances of the case. Id. at 843. Petitioner bears the
burden of proving that it may deduct the management fees it paid.
Rule 142(a); Schaffer v. Commissioner, 779 F.2d 849, 857 (2d Cir.
1985), affg. in part and remanding in part Mandina v.
Commissioner, T.C. Memo. 1982-34.
Petitioner deducted management fees it paid to Dacor and
Kadac totaling $284,300, $699,359, and $738,239 for fiscal years
1989, 1990, and 1991, respectively. Petitioner contends that it
paid the management fees exclusively for personal services and
that the fees are reasonable, ordinary, and necessary under
section 162.
Respondent contends that the management fees were excessive.
Respondent contends that part of the payments was for something
other than services, such as disguised dividends, a transfer of
wealth from Mr. Cummings to members of his family without gift
tax consequences, or a means of evading Oregon income tax.
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