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Respondent determined that the amounts disallowed with respect to
Mr. Wechsler and Mrs. Wechsler exceeded a reasonable allowance
for services rendered within the meaning of section 162. With
respect to Gilbert, respondent determined that no amounts were
allowable because no information was provided showing any service
Gilbert rendered to petitioner.
OPINION
I. Introduction
This case is what is conventionally known as a “reasonable
compensation” case. We must determine the deductibility of
amounts petitioner claims it paid to three individuals as
compensation for personal services rendered to petitioner. There
is no dispute as to the fact of the payments; there is a dispute
only as to the character of portions of those payments.
II. Applicable Law
Section 162(a)(1) permits a taxpayer to deduct “a reasonable
allowance for salaries or other compensation for personal
services actually rendered”. A taxpayer is entitled to a
deduction for compensation only if: (1) The payments were
reasonable in amount, and (2) the payments were for services
actually rendered. Sec. 1.162-7(a), Income Tax Regs. Bonuses
paid to employees are deductible “when * * * made in good faith
and as additional compensation for services actually rendered by
the employees, provided such payments, when added to the
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