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When this case was before us originally, respondent argued that
petitioner’s deductions for compensation paid to Mrs. Harrison
during the audit years should be reduced on account of the
unreasonableness of her salary as follows:
Amount Amount Amount
Year Deducted Allowed Disallowed
1995 $860,682 $54,215 $806,467
1996 818,059 56,040 762,019
1997 600,059 58,734 541,325
Petitioner argued that all amounts paid to her during the audit
years were reasonable and, therefore, were deductible in full.
We concluded that petitioner may deduct the following amounts as
compensation for services performed by Mrs. Harrison during the
audit years:
Year Amount
1995 $98,000
1996 101,000
1997 106,000
We were persuaded that, during the audit years, petitioner was a
company run by Mrs. Harrison’s sons, her role in the operations
of the company had always been “secondary”, and her titles of
president and chairman of the board were titular and not
reflective of her status in the company. We found that her role
as an essentially compliant member of petitioner’s board of
directors justified her receipt of only a small fraction of the
compensation paid to her during the audit years. We considered
apposite respondent’s analogy of Mrs. Harrison’s activities on
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