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On opening brief, petitioner contends as follows:
Additionally, Mr. Brewer’s compensation lacked the
typical benefits package. Mr. Brewer’s compensation package
did not include, a retirement plan, a SEP, a 401(k), a
Profit-sharing plan, a Defined benefits plan, a 205 plan, a
125 plan, sick leave, or paid vacation. (Trial Trans. Vol.
1 page 38) These types of benefits were customary in the
industry and represent a substantial amount of money. This
lack of customary benefits package justifies a larger
salary. (Trial Trans. Vol. 2 pages 193-196) Typically,
companies provide their executives with benefits
representing 24.4% of compensation. (Exhibit 56-P page 7 and
Exhibit X therein) If Mr. Brewer would have had a typical
benefits package his cash compensation could have been 24%
less and he still had the same total compensation.
On answering brief, respondent replies as follows:
Petitioner’s argument that Jack Brewer’s compensation
in 1995 and 1996 made up for the lack of company provided
fringe benefits is unfounded. It was not necessary for Jack
Brewer to participate in a company sponsored profit sharing
plan because, in fact, Jack Brewer determined and allocated
substantially all company profits to himself on December 31
of each year.
We analyze this matter as follows:
Firstly, if petitioner means to say that courts apply the
reasonable compensation test to only “cash compensation”, then
petitioner is wrong.
It has long been settled law that--
The sum of all compensation, deferred as well as direct,
must meet the requirement of �162 that it be reasonable in
amount. [Edwin’s, Inc. v. United States, 501 F.2d 675, 679
(7th Cir. 1974).]
To the same effect, see LaMastro v. Commissioner, 72 T.C. 377,
381-382 (1979); Bianchi v. Commissioner, 66 T.C. 324, 329-330
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