International Capital Holding Corp. and Subsidiaries - Page 20




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          the services were rendered the parties understood them to be part           
          of a business transaction conducted for profit.”  Id.                       
               Petitioners allege that Quest provided valuable investment,            
          financial, and management consulting services to Norcom over an             
          extended period of time.  Petitioners further allege that in 1995           
          and 1996 they paid reasonable compensation to Quest for these               
          services.  Respondent takes the position that (1) Norcom lacked             
          the requisite compensatory intent; and (2) the payments do not              
          constitute reasonable compensation because petitioners failed to            
          establish the extent of the services rendered.  We disagree with            
          respondent.                                                                 
               Intent To Compensate                                                   
               The evidence strongly supports petitioners’ contention that            
          they intended to compensate Quest for services rendered when they           
          made the $1 million payment in 1995 and the $700,000 payment in             
          1996.  The Court finds it especially significant that both                  
          payments were initially negotiated by officers of Norcom and                
          Quest who did not hold any ownership interest in either company.            
          Specifically, Mr. Espy, chief operating officer of Quest,                   
          approached Mr. Rahn, president of Norcom, with the suggestion               
          that Norcom compensate Quest for services rendered, whereupon               
          Messrs. Espy and Rahn negotiated the amount of the payments.  The           
          Court sees no reason to second-guess payments that were                     
          negotiated by two disinterested members of the management teams             






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