- 21 -                                         
          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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