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1999), revg. T.C. Memo. 1997-464; sec. 1.162-7(a), Income Tax
Regs.; see also Pulsar Components Intl., Inc. v. Commissioner,
T.C. Memo 1996-129; Mad Auto Wrecking, Inc. v. Commissioner, T.C.
Memo 1995-153. Petitioner must prove that it may deduct
compensation in an amount greater than that determined by
respondent. See Rule 142(a). Careful scrutiny of the facts is
appropriate in a case such as this where the payor is controlled
by the payee/employee. See Pulsar Components Intl., Inc. v.
Commissioner, supra; Mad Auto Wrecking, Inc. v. Commissioner,
supra.
We have no doubt that the $1,750,000 paid to Mr. Ashare
meets the first test for deductibility; i.e., it is reasonable in
amount as to the compensation that a personal service corporation
such as petitioner could pay its key employee in a year for his
services. Mr. Ashare's qualifications for his position with
petitioner justify high compensation, as does the fact that he is
vital and indispensable in petitioner's operation and success.
Petitioner's business also is complex and highly specialized, and
it demands a person of Mr. Ashare's expertise. See Alpha Med.,
Inc. v. Commissioner, supra at 945; Mayson Manufacturing Co. v.
Commissioner, 178 F.2d 115, 119 (6th Cir. 1949), revg. and
remanding a Memorandum Opinion of this Court dated Nov. 16, 1948;
see also Pulsar Components Intl., Inc. v. Commissioner, supra;
Mad Auto Wrecking, Inc. v. Commissioner, supra.
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