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II. OPINION
A. Positions of the Parties
Respondent determined that it was unreasonable for
petitioner to pay Eberl more than $286,815 for services rendered
in fiscal year 1992 and $234,227 in fiscal year 1993. Respondent
now contends that the amounts petitioner paid in excess of
$500,000 for fiscal year 1992 and $400,000 for fiscal year 1993
were unreasonable compensation, disguised dividends, and not for
services to petitioner. Petitioner contends that the amounts it
paid Eberl in fiscal years 1992 ($4,340,000) and 1993
($2,080,000) were reasonable and were for services Eberl provided
to petitioner.
A taxpayer may deduct payments for compensation if the
amount paid is reasonable in amount and for services actually
rendered. Sec. 162(a)(1). Petitioner bears the burden of
proving the reasonableness of compensation it paid in excess of
what respondent contends was reasonable. Rule 142(a).
B. Controlling Factors
Courts have considered several factors in deciding whether
compensation is reasonable in amount, such as: (1) The
employee's qualifications; (2) the nature and scope of the
employee's work; (3) the size and complexity of the business; (4)
general economic conditions; (5) the employer's financial
condition; (6) a comparison of salaries paid with sales and net
income; (7) distributions to shareholders and retained earnings;
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