- 87 -
total compensation of a comparable group of executives, it should
be treated as reasonable for purposes of section 280G(b)(4) even
though the individual compensation of certain Retained Executives
was unreasonable.49
We conclude that petitioner’s and Ms. Meyer’s position is
unsupportable as a matter of law. First, the legislative history
of section 280G indicates that Congress contemplated that the
test for reasonableness of compensation would be applied on an
individual basis.
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 * * * paid to the disqualified
individual in prior years * * * will normally serve as
clear and convincing evidence of reasonable
compensation for such services. [S. Rept. 99-313,
supra at 919-920, 1986-3 C.B. (Vol. 3) at 919-920; see
also H. Rept. 99-426, supra at 902, 1986-3 C.B. (Vol.
2) at 902 (containing substantially identical
language); emphasis added.]
Moreover, the Finance Committee’s description of the test
comports with longstanding caselaw requiring the determination of
reasonable compensation for purposes of section 162(a)(1) on an
individual rather than group basis. See, e.g., Hendricks
Furniture, Inc. v. Commissioner, T.C. Memo. 1988-133; RTS Inv.
49 In her opening report, Ms. Meyer’s comparisons
demonstrated that, on an individual basis, four of the Retained
Executives received unreasonable compensation, but she
disregarded this result in light of her view that the aggregate
compensation of the Retained Executives as a group was
demonstrated as reasonable.
Page: Previous 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 NextLast modified: May 25, 2011