- 18 - officers’ compensation in the amounts of $140,776 and $19,450, for 1994 and 1995, respectively (the remaining amounts). Section 162(a)(1) (set forth supra in section I.D.) allows a deduction for payments of “a reasonable allowance for salaries or other compensation for personal services actually rendered”. Respondent’s ground for disallowing petitioner’s deduction for the remaining amounts is that such amounts are disguised dividends rather than compensation for services. B. Question Before Us 1. Introduction As discussed supra in section I.D., section 162(a)(1) establishes a two-pronged test for determining whether a payment is deductible as compensation for services. The payment must be both reasonable and, in fact, purely for services. In part, the parties have directed their arguments to the reasonableness aspect of that test. We do not believe, however, that whether the return amounts were reasonable in amount is actually in question.4 The question framed by the parties’ briefs is whether the remaining amounts were paid to the shareholder surgeons purely for their services. In respondent’s opening brief, respondent relies on the following point: “The respondent 4 For 1995, petitioner deducted $1,508,675 as officers’ compensation, and, after concessions, respondent would disallow $19,450, which is 1.29 percent of the amount deducted. We hesitate to conclude that respondent would ask us to find that compensation was unreasonable based on such a small variance.Page: Previous 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 Next
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