Frank and Virginia Muhich - Page 22

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          additional amounts based upon Midwest's financial performance.              
          This compensation package is very similar to the commission type            
          arrangement used before the trust scheme.  On the primary basis             
          of the amount of compensation that Midwest paid petitioner before           
          the subject years, the type and content of the services he                  
          performed during the subject years, and the gross receipts those            
          services produced for Midwest, we conclude petitioner's                     
          compensation during the subject years was reasonable.  We hold              
          Midwest may deduct the "consulting fees" under section 162, and             
          petitioner must include these fees in income in the amounts of              
          $100,820 and $130,193 for 1994 and 1995, respectively.                      
               We now turn to the $12,000 and $5,500 payments made by                 
          Midwest to the trust promoters in 1994 and 1996, respectively.              
          Respondent determined these amounts were not deductible by                  
          Midwest and that the $12,000 was a constructive dividend to                 
          petitioner.14  Petitioners contend that both amounts were                   
          deductible under section 162(a), and that the $12,000 is not                
          includable in petitioner's income.  We disagree.                            
               A taxpayer may deduct "all ordinary and necessary expenses             
          paid or incurred during the taxable year in carrying on any trade           
          or business."  Sec. 162.  The taxpayer must show that the                   

               14 The issue of whether the $5,500 payment was includable in           
          petitioner's gross income as a constructive dividend is not                 
          before the Court.                                                           

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