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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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