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Moreover, we find no evidence that Lea dominated Cascade's
board of directors or the other officers. Rather, the minutes
show that all the officers participated in making the corporate
decisions, that it was primarily Burroughs' decision as vice
president and treasurer whether to pay Lea and the amount to pay
him, and that Burroughs negotiated the terms of the 1982
agreement on behalf of Cascade.
The payment percentage, 5 percent of the selling price of
the covered products, negotiated by Burroughs is well within the
range paid for similar patents and technologies. Burroughs, as
vice president, signed the 1982 agreement and testified that at
the time the parties entered into the agreement, he thought the
agreement was fair and reasonable. We had an opportunity at
trial to observe Burroughs and to evaluate his demeanor as a
witness. We find Burroughs to be a credible witness, and we are
satisfied that his testimony is truthful.
Finally, the evidence shows that the payments to Lea bore no
relationship to the percentage of his stock ownership. Cf.
Granberg Equip., Inc. v. Commissioner, 11 T.C. 704, 714 (1948)
(so-called royalty was payable to the stockholders in almost the
same percentage that their stockholdings bore to the taxpayer's
total stock).
It is clear from the facts that the patents Lea sold to
Cascade in 1979 were very valuable to the corporation, and we
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