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that petitioner paid Mr. Ashare the $1,750,000 to compensate him
for services connected to that case.
Respondent focuses on petitioner's longstanding compensation
formula and observes that the amount of Mr. Ashare's compensation
does not follow from an application of that formula. Respondent
concludes that petitioner paid the $1,750,000 to Mr. Ashare
without the requisite intent to compensate him for his services.
We do not agree. Although it is true, as respondent observes,
that petitioner did not correctly apply its longstanding formula
to ascertain Mr. Ashare's compensation for 1993, petitioner's
management obviously decided that Mr. Ashare was entitled to be
paid a greater amount during that year. It does not matter that
petitioner's revenues during that year were less than the
$1,750,000 payment, or that the $1,750,000 payment produced a
deficit in retained earnings. The dispositive fact of this case
is that petitioner's board, through an exercise of unwritten
corporate policy, set Mr. Ashare's compensation for 1993 at
$1,750,000.
The facts of this case indicate that the board truly
believed that Mr. Ashare's services were worth paying him
$1,750,000 in 1993. Mr. Bess testified adamantly that the board
considered the value of petitioner's past and present services
when it set Mr. Ashare's compensation for each year, and we find
in the record that the board knew how to limit Mr. Ashare's
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