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believed a $100,000 bonus was appropriate and reasonable to reflect
Mr. Leonard's personal efforts at securing the All American
Pipeline contract and guaranteeing the loan to the Royal Bank of
Canada, as well as his development of the pipeline insulation
process. Therefore, we concluded that $395,000 ($200,000 + $95,000
+ $100,000) represented an appropriate total amount for Mr.
Leonard's salary and bonus for 1987, and as stated, rounded this
amount to $400,000.
We also concluded that $296,000 paid to Mr. Leonard was
appropriate and, after rounding to $300,000, represented reasonable
compensation as a lump-sum retirement payment. We reached this
conclusion on the basis of the fact that petitioner did not offer
Mr. Leonard any retirement or pension benefits, a feature common,
if not expected, for someone of Mr. Leonard's position with
petitioner. High compensation is reasonable when there is a
corresponding lack of fringe benefits such as pension plans or
stock options which might normally be expected. Rutter v.
Commissioner, 853 F.2d 1267, 1274 (5th Cir. 1988), affg. T.C. Memo.
1986-407.
Both parties' experts provided figures for retirement
benefits. Petitioner's expert Mr. Kesner believed that Mr. Leonard
was entitled to a lump-sum payment for retirement benefits of
$296,000. Respondent's expert, Mr. Brennan, stated that in the
event the Court determined that Mr. Leonard is entitled to a
retirement benefit, he would allocate $167,450 for that benefit.
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