- 20 -
made by the corporation. Thomas A. Curtis, M.D., Inc.
v. Commissioner, 67 T.C.M. (CCH) 1958, 1963 (1994)
[T.C. Memo. 1994-15]; LaMastro v. Commissioner, 72 T.C.
337, 384 (1979). The Tax Court in LaMastro, relying on
Bianchi v. Commissioner, 66 T.C. 324 (1976), aff’d. per
curium [sic], 553 F.2d 93 (2nd Cir. 1977), held that
the best evidence of the value of a dentist’s personal
services is the profit derived from the practice. Id.
at 383.
In Bianchi v. Commissioner, supra at 333, we held that it is
proper to examine the prior self-employment earnings of a
corporate employee to determine whether compensation currently
paid to such employee by the corporation is reasonable.
In Bianchi, the corporate employee, a dentist, had incorporated
his individual proprietorship, transferring to the corporation
(which elected status as an S corporation) the equipment
previously used in the proprietorship, accounts receivable, and
good will. See id. at 325. In determining what would be
reasonable compensation for his services provided to the
corporation, we said: “It cannot be questioned that the clearest
evidence of the worth of petitioner’s services is petitioner’s
earnings from his dentistry practice as an individual
proprietor.” Id. at 333. It is clear that, in referring to
“petitioner’s earnings”, we were referring to the profit earned
by the dentist as an individual proprietor. Indeed, we restated
our point as follows: “[T]he best evidence of the value of his
personal services is profit he derived from his own practice.”
Id. at 335 (emphasis added). Undoubtedly, we were using the term
Page: Previous 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 NextLast modified: May 25, 2011