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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. * * *
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