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business to deduct “a reasonable allowance for salaries and other
compensation for personal services actually rendered” as an
ordinary and necessary business expense. In this case,
deductibility requires that the payment be (1) purely for
services rendered and (2) reasonable in amount. Trinity Quarries,
Inc. v. United States, 679 F.2d 205 (11th Cir. 1982); Estate of
Wallace v. Commissioner, 95 T.C. 525, 553-554 (1990), affd. 965
F.2d 1038 (11th Cir. 1992); Paula Constr. Co. v. Commissioner, 58
T.C. 1055 (1972), affd. without published opinion 474 F.2d 1345
(5th Cir. 1973); Law Offices–-Richard Ashare, P.C. v.
Commissioner, T.C. Memo. 1999-282; sec. 1.162-7(a); Eyefull, Inc.
v. Commissioner, T.C. Memo 1996-238; Pulsar Components Intl.,
Inc. v. Commissioner, T.C. Memo. 1996-129, Income Tax Regs.
It is well established that a payment is deductible as
compensation only to the extent that it was actually intended as
such. Elec. & Neon, Inc. v. Commissioner, 56 T.C. 1324, 1340
(1971), affd. without published opinion 496 F.2d 876 (5th Cir.
1974); Eyefull, Inc. v. Commissioner, supra. Whether such intent
existed is a factual question to be decided on the basis of the
facts and circumstances of the case. Paula Constr. Co. v.
Commissioner, supra at 1059. The burden of proof rests upon
8(...continued)
(1) a reasonable allowance for salaries
or other compensation for personal services
actually rendered;
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