- 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
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 Next
Last modified: May 25, 2011