- 13 - both: (1) Reasonable in amount, and (2) paid purely for services rendered to the corporation. Charles Schneider & Co. v. Commissioner, 500 F.2d 148, 151 (8th Cir. 1974), affg. T.C. Memo. 1973-130; sec. 1.162-7(a), Income Tax Regs. It is clear that bonuses may be part of the allowable deductions as long as the sum of the base pay and the bonuses does not exceed a reasonable compensation. Pacific Grains, Inc. v. Commissioner, 399 F.2d 603, 605 (9th Cir. 1968), affg. T.C. Memo. 1967-7; sec. 1.162-9, Income Tax Regs.3 Neither party has suggested that Rogers did not render valuable services to petitioner. Accordingly, we will focus on the first element of the deductibility test--whether the amounts of the payments were reasonable. Whether the compensation is reasonable is a question to be resolved on the basis of an examination of all the facts and circumstances of the case. Mayson Manufacturing Co. v. Commissioner, 178 F.2d 115, 118 (6th Cir. 1949), revg. 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 3 Sec. 1.162-9, Income Tax Regs., provides in part: Bonuses to employees will constitute allowable deductions from gross income when such amounts are made in good faith and as additional compensation for the services actually rendered by the employees, provided such payments, when added to the stipulated salaries, do not exceed reasonable compensation for the services rendered. * * *Page: Previous 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Next
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