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compensation is for services provided before, or after, the date
of the change in ownership or control. See Tax Reform Act of
1986, Pub. L. 99-514, sec. 1804(j)(2), 100 Stat. 2808. In
connection with this amendment of the reasonable compensation
provisions of section 280G, the Finance Committee report states:
The committee intends that evidence that amounts
paid to a disqualified individual for services to be
rendered that are not significantly greater than
amounts of compensation (other than compensation
contingent on a change in ownership or control or
termination of employment) paid to the disqualified
individual in prior years or customarily paid to
similarly situated employees by the employer or by
comparable employers will normally serve as clear and
convincing evidence of reasonable compensation for such
services. [S. Rept. 99-313, at 919-920 (1986), 1986-3
C.B. (Vol. 3) 1, 919-920; see also H. Rept. 99-426, at
902 (1985), 1986-3 C.B. (Vol. 2) 1, 902 (containing
substantially identical language).]
The foregoing legislative history convinces us that Congress
intended that reasonable compensation for purposes of section
280G(b)(4) was generally to be determined under the conventional
multifactor test. The factors enumerated in the Finance
Committee report--that is, the employee’s compensation in prior
years and the compensation paid to similarly situated employees
of the taxpayer or of comparable employers--are archetypal
factors of the conventional multifactor test.35 We accordingly
35 Similar factors are also included in Q&A-40 of the
proposed, revised proposed, and final regulations. Sec. 1.280G-
1, Proposed Income Tax Regs., 54 Fed. Reg. 19406 (May 5, 1989),
as corrected by 54 Fed. Reg. 25879 (June 20, 1989) and further
(continued...)
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