International Capital Holding Corp. and Subsidiaries - Page 25




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          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.                      






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