- 60 -
Circuit described as “material” to this inquiry any evidence
showing that “the company did not in fact intend to pay * * *
[the CEO] that amount as salary, that * * * [the CEO’s] salary
really did include a concealed dividend though it need not have.”
Id.
A taxpayer’s intent with respect to the payment of
compensation is a question of fact that we decide on the basis of
the facts and circumstances of the case. Paula Constr. Co. v.
Commissioner, 58 T.C. 1055, 1059 (1972), affd. without published
opinion 474 F.2d 1345 (5th Cir. 1973). Compensatory intent is
subjective and difficult to prove. O.S.C. & Associates, Inc. v.
Commissioner, 187 F.3d 1116, 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.
If the Commissioner introduces evidence suggesting that the
compensation was a disguised dividend, even if the payment was
reasonable in amount, we inquire into whether the taxpayer had a
compensatory purpose for the payment. O.S.C. & Associates, Inc.
v. Commissioner, supra at 1121; Elliotts, Inc. v. Commissioner,
supra at 1243-1244. The taxpayer’s failure to pay dividends
since its formation, alone, is not sufficient evidence of a
disguised dividend. Elliotts, Inc. v. Commissioner, supra at
1244. However, the presence of the following six factors
indicates that compensation was not intended for personal
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