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not permit Norcom to compensate Quest for services provided to
Norcom before 1994.
We find that the circumstances underlying Norcom’s payments
to Quest in 1995 and 1996 confirm that the payments were made to
compensate Quest for services rendered.
Reasonableness of the Compensation
The second element of the compensation test is whether the
payments are reasonable in amount. Trinity Quarries, Inc. v.
United States, 679 F.2d at 210; Estate of Wallace v.
Commissioner, 95 T.C. at 553; Haffner’s Serv. Stations, Inc. v.
Commissioner, T.C. Memo. 2002-38. Respondent has conceded that
the payments were reasonable if petitioners substantiate that the
services were provided as claimed.
To determine whether petitioners satisfied this condition,
we must initially determine the extent of the services
petitioners claimed to have received from Quest. In the
petition, petitioners made the following claims regarding the
services provided by Quest to Norcom: (1) Norcom hired Quest in
the early 1990s, (2) Quest employed at least four senior level
management advisers who worked with Norcom, and (3) Quest
provided along with other services, the following: (i) analyzing
Norcom’s financing needs; (ii) hiring senior and key executives
at Norcom; (iii) managing Norcom’s facilities; (iv) negotiating
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