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expert can rely on data that is not admissible to form his
opinion, such reliance does not elevate the evidence to be
admissible for the truth of the matter asserted. Fed. R. Evid.
703.
Petitioner contends that even though the ERI data considers
businesses similar to it, “exceptional business data is not
available”. Petitioner’s statement identifies the issues related
to the application of this data to the instant case. The ERI and
RMA materials are compilations of data that we do not believe
rise to the level required by rule 201(b) of the Federal Rules of
Evidence. For these reasons, we do not find these materials
subject to judicial notice. However, since we analyzed the data
contained therein in the context of the experts’ reports and
testimony, whether these materials are admissible does not change
our analysis.
V. Compensation Paid for Prior Year’s Services
Petitioner claims that a portion of the total compensation
paid to its shareholder-employees during the tax years in issue
was to remedy past undercompensation. Under some circumstances,
a taxpayer may deduct compensation paid in one year for services
rendered in prior years. Lucas v. Ox Fibre Brush Co., 281 U.S.
115, 119 (1930). But to deduct amounts paid as compensation for
past undercompensation, a taxpayer must show: (a) Its intention
that part of the current payments compensate employees for past
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