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In fact, there is no evidence that the income stream (rental
income and mortgage installment payments) was in jeopardy. While
it is clear that the Valentes played some role in producing the
1995 and 1996 income increases over prior years, the increases
were limited to the acquisition and sale of realty and marketable
securities.
During 1995 and 1996, petitioner’s adjusted taxable income
(pretax and without considering net operating loss deductions
from other years) was $294,587 and $518,755, respectively.
Assuming an independent investor would have been satisfied with a
20-percent return, then as much as $235,670 and $415,004, for
1995 and 1996, respectively, would have been available for
compensation of petitioner’s officers. However, reasonable
compensation cannot be based solely on allowing an amount that
represented what was left after computing what was thought to be
a fair return for an investor. Under any measure of reasonable
compensation, the amount must be for “personal services actually
rendered”. Sec. 162(a)(1); Elliotts, Inc. v. Commissioner, supra
at 1245; Exacto Spring Corp. v. Commissioner, supra at 835.
The facts in these cases reflect that a majority of
petitioner’s income stream would have existed regardless of the
Valentes’ services or efforts during 1995 and 1996. The passive
portion of petitioner’s income was well established and would
continue with a minimum amount of effort. We also note that Mr.
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