- -12
proves respondent's determination erroneous, the Court must then
decide the amount of compensation that was reasonable. Pepsi-
Cola Bottling Co. v. Commissioner, 61 T.C. 564, 568 (1974), affd.
528 F.2d 176 (10th Cir. 1975).
The reasonableness of compensation is a question of fact to
be determined from the record in each case. Estate of Wallace v.
Commissioner, 95 T.C. 525, 553 (1990), affd. 965 F.2d 1038 (11th
Cir. 1992). In Estate of Wallace v. Commissioner, we used the
following nine factors to determine reasonableness: (1) the
employee's qualifications; (2) the nature, extent, and scope of
the employee's work; (3) the size and complexities of the
business; (4) a comparison of salaries paid with the gross income
and the net income; (5) the prevailing general economic
conditions; (6) comparison of salaries with distributions to
stockholders; (7) the prevailing rates of compensation for
comparable positions in comparable concerns; (8) the salary
policy of the corporation as to all employees; and (9) in the
case of small corporations with a limited number of officers, the
amount of compensation paid to the particular employee in
previous years. Estate of Wallace v. Commissioner, supra at 553;
see also Mayson Manufacturing Co. v. Commissioner, 178 F.2d 115,
119 (6th Cir. 1949). All the facts must be considered; no one
factor is determinative. Rutter v. Commissioner, 853 F.2d 1267,
1274 (5th Cir. 1988), affg. T.C. Memo. 1986-407; Pacific Grains,
Page: Previous 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 NextLast modified: May 25, 2011