- 17 - reasonable compensation for the services rendered.” Sec. 1.162- 9, Income Tax Regs.8 Generally, courts have focused on the reasonableness requirement in determining deductibility. Elliotts, Inc. v. Commissioner, 716 F.2d 1241, 1243-1244 (9th Cir. 1983), revg. and remanding T.C. Memo. 1980-282. The reasonableness of compensation is a question of fact to be answered by considering all facts and circumstances of the particular case. Pepsi-Cola Bottling Co. of Salina, Inc. v. Commissioner, 528 F.2d 176, 179 (10th Cir. 1975), affg. 61 T.C. 564 (1974); Estate of Wallace v. Commissioner, 95 T.C. 525, 553 (1990), affd. 965 F.2d 1038 (11th Cir. 1992). Petitioner has the burden of showing that the amount it deducted as compensation was reasonable, and that it is entitled to a compensation deduction larger than that allowed by respondent. Rule 142(a); Pepsi-Cola Bottling Co. of Salina, Inc. v. Commissioner, supra at 179; Nor- Cal Adjusters v. Commissioner, 503 F.2d 359, 361 (9th Cir. 1974), affg. T.C. Memo. 1971-200.9 8In the notice of deficiency, respondent did not adjust the $238,000 of bonuses paid to Mr. Myers and Mrs. Myers for the 1995 and 1996 fiscal years that petitioner deducted on its fiscal year 1996 return. However, the total compensation that was paid to Mr. and Mrs. Myers during the 1996 fiscal year in issue included these bonuses. Accordingly, in evaluating the reasonableness of the salaries petitioner paid and deducted for Mr. Myers and Mrs. Myers, we consider the total compensation they received, including bonuses. 9The Internal Revenue Service Restructuring and Reform Act of 1998 (RRA), Pub. L. 105-206, sec. 3001(a), 112 Stat. 685, 726- 727, enacted sec. 7491 to shift the burden of proof to respondent (continued...)Page: Previous 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 Next
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