- 3 -
otherwise) paid under the 1991 agreements as amended,
were contingent on a change in ownership or effective
control within the meaning of sec. 280G(b)(2)(A)(i),
I.R.C., because they would not have been made but for
the change in ownership or control. The phrase
“contingent on a change in the ownership or effective
control” of sec. 280G(b)(2)(A)(i), I.R.C., is
interpreted in light of legislative history.
Accordingly, the payments are parachute payments for
purposes of sec. 280G(b)(2), I.R.C.
Held, further, whether P has established that any
portion of the parachute payments was reasonable
compensation for purposes of sec. 280G(b)(4)(A),
I.R.C., must be determined on the basis of a
multifactor test, considering all the facts and
circumstances. Exacto Spring Corp. v. Commissioner,
196 F.3d 833 (7th Cir. 1999), revg. Heitz v.
Commissioner, T.C. Memo. 1998-220, applying an
independent investor test to determine reasonable
compensation for purposes of sec. 162(a), I.R.C.,
distinguished.
Held, further, extent to which P has met burden of
showing by clear and convincing evidence that any
portion of parachute payments was reasonable
compensation within the meaning of sec. 280G(b)(4)(A),
I.R.C., determined.
Robert H. Aland, Gregg D. Lemein, Tamara L. Meyer, Oren S.
Penn, David G. Noren, John D. McDonald, and Holly K. McClellan,
for petitioner.
Lawrence C. Letkewicz and Dana E. Hundrieser, for
respondent.
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