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Accordingly, we are unpersuaded that we should deviate from the
reasonable compensation amounts determined by the experts in
these cases. Rather, we conclude that these expert reports
establish a consensus as to the amounts of compensation that were
reasonable for the services that Rose performed for PK Ventures
and its subsidiaries during 1992 and 1993. Because the experts’
calculations lead to approximations, in any event, and because
Rose’s services to PK Ventures and its subsidiaries were
obviously substantial, we give him the benefit of the higher of
the amounts determined by the experts.
Using our best judgment on the entire record, we conclude
that, for 1992 and 1993, reasonable compensation for Rose is
$383,104 and $366,391, respectively. Therefore, for 1992, PKV&S
is limited to deducting $383,104 for compensation paid to Rose
plus an additional $294,738 to reflect the amount allowed by
respondent in the PKV&S notice of deficiency for “deferred
compensation”. For 1993, PKV&S is limited to deducting $366,391
for compensation paid to Rose.
Issue #9–-Penalties
Respondent determined accuracy-related penalties with
respect to the Roses under section 6662(a) for substantial
understatements of income tax on their joint income tax returns
for 1990 through 1993. Under section 6662(a), a taxpayer may be
liable for a penalty of 20 percent on the portion of an
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