-2-
Contractors, Ltd. v. Commissioner, 142 F.3d 1133 (9th Cir. 1998),
revg. and remanding T.C. Memo. 1996-316.
The issue for decision concerns the reasonableness of the
amount of compensation paid by petitioner to its president, Richard
L. Leonard, in 1987. We previously determined in Leonard Pipeline
Contractors, Ltd. v. Commissioner, T.C. Memo. 1996-316 (Leonard
Pipeline I), that of the $1,777,800 petitioner paid Mr. Leonard in
1987, only $700,000 was reasonable and thus deductible as a section
162 business expense.1 The Court of Appeals has directed us to
explain how we arrived at our conclusion that $700,000 represented
a reasonable amount of compensation. The Court of Appeals has
further directed us to consider that the burden of proof is on
petitioner, and to
determine what, if any, factors, have been
demonstrated so as to require a setting aside
of the Commissioner's determination, the
recognition of a right to increased
compensation, and the establishment of an
amount qualifying as reasonable under
� 162(a)(1).
142 F.3d at 1136.
FINDINGS OF FACT
The findings of fact are set forth in Leonard Pipeline I and
are incorporated herein by this reference. For convenience, we
shall repeat those facts as necessary to clarify the ensuing
1 All section references are to the Internal Revenue Code
in effect for the year in issue, and all Rule references are to
the Tax Court Rules of Practice and Procedure.
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