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Wertlieb concluded that petitioner outperformed the 34 companies
in terms of that calculation with one exception in 1999.
OPINION
A. Deduction of Compensation Paid to Beiner
We decide whether section 162(a)(1) allows petitioner to
deduct as reasonable compensation the portion of the officer
compensation claimed paid to Beiner and disallowed by respondent
in the notice of deficiency.5 A payment of compensation is
deductible under section 162(a)(1) only if it is both (1)
reasonable in amount and (2) paid for services actually rendered
to the payor in or before the year of payment. Lucas v. Ox Fibre
Brush Co., 281 U.S. 115, 119 (1930); LabelGraphics, Inc. v.
Commissioner, 221 F.3d 1091, 1095 (9th Cir. 2000), affg. T.C.
Memo. 1998-343; O.S.C. & Associates, Inc. v. Commissioner,
187 F.3d 1116, 1119-1120 (9th Cir. 1999), affg. T.C. Memo.
1997-300; Elliotts, Inc. v. Commissioner, 716 F.2d 1241, 1243
(9th Cir. 1983), revg. and remanding T.C. Memo. 1980-282;
Nor-Cal Adjusters v. Commissioner, 503 F.2d 359, 362 (9th Cir.
5 Sec. 162(a)(1) provides:
SEC. 162(a). In General.--There shall be allowed
as a deduction all the ordinary and necessary expenses
paid or incurred during the taxable year in carrying on
any trade or business, including--
(1) a reasonable allowance for salaries
or other compensation for personal services
actually rendered;
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