- 9 - compensation greatly exceeded the compensation paid by Menards’s chief competitors to their CEOs. As respondent points out in his response to petitioners’ motion, petitioners make no attempt to explain why evidence of Mr. Menard’s compensation for taxable years ended before 1991 has any relevance to our analysis under the independent investor test established in Exacto Spring Corp. The independent investor test focuses on the rate of return on equity for the year the compensation is paid. The presumption of reasonableness created by a qualifying rate of return is rebutted either by evidence that something other than the CEO’s services generated or contributed to that year’s rate of return or by evidence that the marketplace considered the CEO’s compensation for that year to be unreasonable. Petitioners have failed to explain how evidence of Mr. Menard’s compensation in taxable years ended before 1991 is relevant to any aspect of the independent investor test. Petitioners also failed to present any argument regarding why this evidence is relevant to the “purely for services” prong of the section 162 test for deducting compensation. The burden of demonstrating an exhibit’s relevance is on the party seeking its admission. Dowling v. United States, 493 U.S. 342 (1990). Moreover, a court has broad discretion to determine the admissibility of evidence based on remoteness in time. Keyes v. School Dist. No. 1, 521 F.2d 465, 473 (10th Cir. 1975). ThePage: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Next
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