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Under certain circumstances, prior services may be
compensated in a later year. Lucas v. Ox Fibre Brush Co., 281
U.S. 115 (1930); American Foundry v. Commissioner, 59 T.C. 231,
239 (1972), affd. in part and revd. in part 536 F.2d 289 (9th
Cir. 1976). However, in such instances, the taxpayer must
establish that there was not sufficient compensation in the prior
periods and that, in fact, the current year’s compensation was to
compensate for that underpayment. Estate of Wallace v.
Commissioner, 95 T.C. 525, 553-554 (1990), affd. on another
ground 965 F.2d 1038 (11th Cir. 1992).
The cases contain a lengthy list of factors that are
relevant in the determination of reasonableness, including: The
employee’s qualifications; the nature, extent, and scope of the
employee’s work; the size and complexities of the business; a
comparison of salaries paid with gross income and net income; the
prevailing general economic conditions; a comparison of salaries
with distributions to stockholders; the prevailing rates of
compensation for comparable positions in comparable concerns; the
salary policy of the taxpayer as to all employees; and the amount
of compensation paid to the particular employee in previous
years. Mayson Manufacturing Co. v. Commissioner, 178 F.2d 115
(6th Cir. 1949), affg. a Memorandum Opinion of this Court; see
also Commercial Iron Works v. Commissioner, 166 F.2d 221, 224
(5th Cir. 1948). In Elliotts, Inc. v. Commissioner, 716 F.2d
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