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advised the Corporation's employees and negotiated
on behalf of * * * [Norcom] in connection with
numerous bank transactions, renegotiated and
extended the existing bank line with LaSalle
National Bank, reviewed and analyzed monthly
financial statements and the annual operating
budget for 1997, and acted as general consultant
to * * * [Norcom] as to its productivity and
profitability; and
WHEREAS, the president has proposed to the
board that * * * [Norcom] pay a management fee to
Quest Capital Corp. in the amount of $700,000.00
in consideration for the aforementioned services,
this amount being consistent with the Services
Agreement and the amounts paid in 1994 and 1995
which are hereby ratified as to amount and prior
year's consistent practice and methodology;
THEREFORE IT IS RESOLVED, that the president
is authorized and directed by the board of
directors to pay the amount of $700,000.00 to
Quest Capital Corp. for the consulting services
described herein.
In December 1996 Norcom's board of directors executed the
resolution, and $700,000 was paid to Quest as a management fee.
OPINION
We must decide whether the payments from Norcom to Quest are
deductible under section 162(a)(1).8 Section 162(a)(1) allows a
8 That section provides:
SEC. 162(a). In General.–-There shall be allowed
as a deduction all the ordinary and necessary expenses
paid or incurred during the taxable year in carrying on
any trade or business, including–-
(continued...)
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