-15-
Amount of Reasonable Compensation
After considering and weighing the five Elliotts factors, we
were faced with a most difficult dilemma because no clear-cut
"answer" was apparent. Although petitioner proved respondent's
determination to be too low, petitioner did not show the totality
of the amount paid to Mr. Leonard to be reasonable. Accordingly,
we were forced to decide for ourselves an amount which constituted
a reasonable compensation figure on the basis of the record before
us. See Silverman v. Commissioner, 538 F.2d 927, 933 (2d Cir.
1976), affg. T.C. Memo. 1974-285; Acme Constr. Co. v. Commissioner,
T.C. Memo. 1995-6. And in this regard, we agree with the Court of
Appeals for the Ninth Circuit's observation that determining
"reasonableness" of compensation depends "to a degree on the eye of
the beholder." Leonard Pipeline Contractors, Ltd. v. Commissioner,
142 F.3d at 1135. Any attempt to determine reasonable compensation
with mathematical precision is impossible, see, e.g., Jones Bros.
Bakery, Inc. v. United States, 188 Ct. Cl. 226, 245, 411 F.2d 1282,
1294 (1969), and petitioner's experts testified as to this
difficulty.5
On the basis of all of the evidence before us, we were
convinced, and we remain convinced, that the $1,777,800 petitioner
paid Mr. Leonard in 1987 was unreasonable. In our opinion, the
5 Mr. Wagner admitted that "bonus awards, in my
experience, have been subjective", and Mr. Kesner testified that
"This is not--and I repeat not--an exercise in mathematics. It
is an exercise in judgment."
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