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c. Petitioner’s Other Contentions
Petitioner argues that the compensation paid to Isidore and
Steven Klein is justified by the fact that they both guaranteed
the 1984 industrial development bond and remained liable on it in
1993 and 1994. We disagree. First, Steven Klein, not
petitioner, held title to the building purchased with the
proceeds of the industrial development bond. Second, there is
nothing about the financing of petitioner’s building to justify
higher compensation for Steven or Isidore Klein in 1993 and 1994.
Petitioner contends that we should treat it as a personal
service company because its success depends on the skill and
efforts of its officers, Isidore and Steven Klein, rather than on
capital. Petitioner contends that courts are more deferential in
deciding whether payments for services to officers of personal
service companies are reasonable, citing C.T.I. Inc. v.
Commissioner, T.C. Memo. 1994-82, affd. without published opinion
54 F.3d 767 (3d Cir. 1995); Kay, Inc. v. Commissioner, a
Memorandum Opinion of this Court dated Oct. 10, 1949; J. Brodie &
Son, Inc. v. Commissioner, a Memorandum Opinion of this Court
dated Mar. 30, 1949; and Firefoam Sales Co. v. Commissioner, a
Memorandum Opinion of this Court dated Apr. 22, 1947.
Petitioner’s reliance on these cases is misplaced because
petitioner was not a personal service company; it manufactures
and sells products.
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