- 16 - Sec. 1.162-7(a), Income Tax Regs.; see also Nor-Cal Adjusters v. Commissioner, 503 F.2d 359, 362 (9th Cir. 1974), affg. T.C. Memo. 1971-200. B. Positions of the Parties Respondent argues that petitioner’s deductions for compensation paid to Mrs. Harrison during the audit years should be reduced as follows: Amount Amount Amount TYE 6/30 deducted allowed disallowed 1995 $860,682 $54,215 $806,467 1996 818,059 56,040 762,019 1997 600,059 58,734 541,325 Respondent argues that the disallowed amounts are “unreasonable and excessive compensation”. Respondent considers Mrs. Harrison’s services equivalent to those provided by an outsider serving as chair of a corporation’s board of directors, and the amounts respondent allowed as reasonable compensation for the audit years reflect respondent’s concession as to the amounts properly attributable to those services. Respondent also argues that the disallowed amounts were intended to be disguised dividends to Mrs. Harrison rather than payments for services rendered.2 2 Respondent’s “disguised dividend” argument is raised for the first time on brief. Petitioner has not argued that the introduction of that argument on brief constitutes the raising of a “new matter” requiring respondent to bear the burden of proof with respect to that matter. See Rule 142(a). Had petitioner made that argument, we would have rejected it for the reasons set (continued...)Page: Previous 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Next
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