- 25 -
dispute with Mr. Arnold over their respective ownership interests
in Norcom, as a result of which Mr. Lombardi resigned from Norcom
and later sued Mr. Arnold.
Moreover, the lack of additional testimony regarding a pre-
1993 agreement is neither surprising nor necessarily
inconsistent with Norcom’s having the requisite compensatory
intent at the time the payments were made in 1995 and 1996.
Closely held corporations often act informally, with decisions
not being documented in writing. Levenson & Kline, Inc. v.
Commissioner, 67 T.C. 694, 714 (1977); Eyefull, Inc. v.
Commissioner, T.C. Memo. 1996-238. Additionally, in determining
whether Norcom possessed the requisite intent, the relevant time
is when the purported compensation payment was made. Tool
Producers, Inc. v. Commissioner, T.C. Memo. 1995-407.14 The
Court finds it notable that numerous witnesses testified that
before 1993 Quest was not paid by Norcom because Norcom’s
financial condition precluded it from compensating Quest. In any
event, the substantial written documentation between the parties
and the parties’ actions demonstrate that Norcom possessed the
requisite intent when it made the payments.
14 Unlike in Eyefull, Inc. v. Commissioner, T.C. Memo.
1996-238, respondent has not alleged that Norcom and Quest lacked
the necessary business relationship, such that Quest did not
provide services with a view toward being compensated.
Page: Previous 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 NextLast modified: May 25, 2011