- 20 -
The mere fact that the $1,750,000 is reasonable in amount
does not necessarily mean that it is deductible in full. A
deduction for compensation is not allowed to the extent that the
compensation is paid for something other than services rendered
by the payee/employee primarily in or before the year of payment.
See sec. 162(a)(1); Whitcomb v. Commissioner, 733 F.2d 191, 193
(1st Cir. 1984), affg. 81 T.C. 505 (1983); Bonaire Dev. Co. v.
Commissioner, 679 F.2d 159 (9th Cir. 1982), affg. 76 T.C. 789
(1981); King's Ct. Mobile Home Park, Inc. v. Commissioner,
98 T.C. 511, 514 (1992); Paula Constr. Co. v. Commissioner,
58 T.C. 1055, 1058 (1972), affd. without published opinion
474 F.2d 1345 (5th Cir. 1973); see also Tool Producers, Inc. v.
Commissioner, T.C. Memo. 1995-407, affd. without unpublished
opinion 97 F.3d 1452 (6th Cir. 1996). This brings us to our
second inquiry: Did petitioner pay Mr. Ashare the disputed
amount primarily for services provided in or before 1993? On the
basis of our review of the record, we conclude it did. According
to petitioner, the $1,750,000 is deductible in full mainly
because the $12,242,500 paid to Mr. Ashare from 1989 through 1993
is less than the $12,567,623 received on the Gentile case.
Respondent replies that petitioner is incorrect as to the
mechanics of its compensation formula. Messrs. Ashare and Bess
testified that Mr. Ashare's compensation was set at the legal
fees received by petitioner during the year, less corporate
Page: Previous 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 NextLast modified: May 25, 2011