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(Reynolds), a surety bond agent, worked with Choate for
petitioner, and with Barrett, Freese, and Dudley for their own
companies. Reynolds used the following criteria to evaluate the
companies owned by Barrett, Freese, Dudley, and Choate when they
sought surety bonds: (1) The character and integrity of the key
individual, (2) the capacity and experience of the company to
perform projects they want to undertake, and (3) the amount of
cash in or the financial ability of the company to perform the
contracts.
OPINION
A. Contentions of the Parties
Petitioner deducted the $1,010,000 which it paid to Choate
in 1992. Respondent determined and contends that it was
unreasonable to pay Choate more than $265,550, and that part of
the $1,010,000 was not for services that Choate rendered to
petitioner in 1992. Respondent's determination is presumed to be
correct. Rule 142(a).
B. Background
A taxpayer may deduct a reasonable allowance for salaries or
other compensation for services actually rendered. Sec.
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