WSB Liquidating Corporation - Page 10

                                       - 10 -                                         
          nature of severance or retirement benefits to compensate her for            
          past services for which she was undercompensated.  In order for a           
          payment to be deductible as compensation, it must have been made            
          with the intent to compensate.  See Paula Constr. Co. v.                    
          Commissioner, 58 T.C. 1055, 1058 (1972), affd. without published            
          opinion 474 F.2d 1345 (5th Cir. 1973).  This is a question of               
          fact decided on the basis of all the facts and circumstances of             
          the case.  See id. at 1059.  Further, we are mindful that                   
          transactions involving closely held corporations and their                  
          controlling shareholders demand close scrutiny.  See id. at 1058.           
          While the Pension Agreement does recite that Barbara “during many           
          * * * years * * * accepted compensation at a rate substantially             
          less than her services would have commanded on the open market”             
          and that petitioner intends to “appropriately compensate”                   
          Barbara’s past service with a retirement pension, there is no               
          other evidence in the record that Barbara’s compensation for past           
          services was less than market rate or that the value of the                 
          payments provided in the Pension Agreement approximated the past            
          undercompensation.  Cf. Estate of Wallace v. Commissioner, 95               
          T.C. 525, 553-554 (1990) (taxpayer must show past                           
          undercompensation and that current payments remedy that                     
          undercompensation), affd. 965 F.2d 1038 (11th Cir. 1992); Avis              
          Indus. Corp. v. Commissioner, T.C. Memo. 1995-434 (same).                   
          Indeed, the available evidence points to the contrary conclusion            

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