- 16 - 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.Page: Previous 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Next
Last modified: May 25, 2011