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In these cases, the parties dispute the reasonableness of
the total compensation paid to Rose by PK Ventures and its
subsidiaries during 1992 and 1993 and deducted by PKV&S on its
consolidated income tax returns for those years. Petitioners
contend that the amounts that PKV&S deducted as compensation paid
to Rose in 1992 and 1993 were reasonable because (1) a
significant portion of these amounts was intended to be
deductible as compensation for services that Rose performed for
PK Ventures and its subsidiaries during 1986 through 1991 and
(2) an analysis of the facts and circumstances of these cases
establish that these amounts were reasonable. Conversely,
respondent contends that the amounts that PKV&S deducted as
compensation paid to Rose in 1992 and 1993 were not reasonable
because (1) petitioners have failed to establish that a
significant portion of these amounts was intended to be
deductible as compensation for services that Rose performed for
PK Ventures and its subsidiaries during 1986 through 1991 and
(2) the testimony provided by petitioners’ expert witness
establishes that these amounts were not reasonable. We address
the parties’ contentions below.
Petitioners contend that a significant portion of the
compensation that Rose received from PK Ventures and its
subsidiaries during 1992 and 1993 was intended to be deductible
as compensation for services that Rose performed for those
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