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because of the extreme disparity between Mr. Brewer’s
compensation in 1992 and 1993 and his compensation in both
previous and following years that the fact that he was being
compensated for past performance is plainly apparent.
Respondent’s rejoinder is twofold: (1) There is no
indication of an intent to compensate Jack in 1995 or in 1996 on
account of past undercompensation, and (2) Hakala concluded that
Jack was adequately compensated for Jack’s services to petitioner
for 1986 through 1994.
Amounts paid in a later year for earlier years’ services may
be deducted when paid, if the services were undercompensated in
the earlier years. Lucas v. Ox Fibre Brush Co., 281 U.S. 115,
119 (1930); Estate of Wallace v. Commissioner, 95 T.C. at 553;
Cropland Chemical Corp. v. Commissioner, 75 T.C. 288, 297-298
(1980), affd. without published opinion 665 F.2d 1050 (7th Cir.
1981); R.J. Nicoll Co. v. Commissioner, 59 T.C. 37, 50-51 (1972).
In order to be allowed the deduction, the taxpayer must establish
(1) the amount of the undercompensation for the earlier years’
services and (2) that the payment in the later year is intended
as compensation for the earlier years’ services. Pacific Grains,
Inc. v. Commissioner, 399 F.2d 603, 606 (9th Cir. 1968), affg.
T.C. Memo. 1967-7; Perlmutter v. Commissioner, 373 F.2d 45, 48
(10th Cir. 1967), affg. 44 T.C. 382, 403 (1965); Estate of
Wallace v. Commissioner, 95 T.C. at 553-554.
In the instant case, petitioner has presented us with little
more than the claim, and general conclusory testimony, that some
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