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Retention Payments and the disputed 1991 SRP Benefits were
contingent on a change in ownership or effective control within
the meaning of section 280G(b)(2)(A).
Concededly, the Retention Payments and disputed 1991 SRP
Benefits also served in part as consideration for future
services, as the Retained Executives were generally required to
serve out a 3-year (later amended to 4-year) term of employment
to receive them (unless terminated for cause or “good reason”).
However, the statute contemplates situations where such
contingent payments that fall within the definition of “parachute
payment” may also serve as consideration for future services, and
provides a mechanism for exempting amounts from parachute payment
treatment that the taxpayer can show are serving the latter
function; namely, by proving that they are reasonable
compensation for services rendered or to be rendered. See sec.
280G(b)(4). The parties dispute whether the amounts determined
by respondent to be contingent on a change in control constitute
reasonable compensation within the meaning of section
280(G)(b)(4), and it is to that dispute that we now turn.
C. Reasonable Compensation--Applicable Test
Since the Retention Payments and the disputed 1991 SRP
Benefits were contingent on a change in control, they are
parachute payments for purposes of section 280G except to the
extent that petitioner can establish by clear and convincing
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