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The Court of Appeals for the Seventh Circuit did not discuss the
above-quoted regulation in Exacto Spring Corp. v. Commissioner,
supra, or declare it invalid. Neither party in this case has
challenged the regulation or argued that it exceeds the
Treasury’s delegated authority to construe section 162. Treasury
regulations “constitute contemporaneous constructions by those
charged with administration of these statutes which should not be
overruled except for weighty reasons.” Commissioner v. S. Tex.
Lumber Co., 333 U.S. 496, 501 (1948) (citing Fawcus Mach. Co. v.
United States, 282 U.S. 375, 378 (1931)); see also Carle Found.
v. United States, 611 F.2d 1192, 1196 (7th Cir. 1979) (“It is
well established that the regulations must be given great weight
absent a showing that they are unreasonable or inconsistent with
congressional intent.”); Anesthesia Serv. Med. Group, Inc. v.
Commissioner, 85 T.C. 1031, 1048 (1985), affd. 825 F.2d 241 (9th
Cir. 1987). As we read section 1.162-7, Income Tax Regs., we are
required to consider evidence of compensation paid to CEOs in
comparable companies when such evidence is introduced to show the
reasonableness or unreasonableness of a CEO’s compensation.
Because each of the parties offered expert testimony on the
reasonableness of Mr. Menard’s compensation that relied upon data
from publicly traded companies that the parties agreed are
comparable, we must consider such evidence in deciding whether
the presumption of reasonableness that respondent has conceded
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