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heavily against petitioner since the inexactitude in this case is
of its own making, and using our best judgment, we conclude that
reasonable compensation to Mrs. Wechsler for petitioner’s 1999
fiscal year is $253,154. This $253,154 in reasonable
compensation includes the $178,154 in annual salary that
petitioner paid her and a $75,000 bonus to her for that year.
See Cohan v. Commissioner, 39 F.2d 540, 544 (2d Cir. 1930). We
hold that petitioner can deduct this $253,154 in reasonable
compensation under section 162(a)(1) for that year. We further
hold that petitioner cannot deduct the remaining $233,000 in
compensation (above the $253,154 we have determined to be
reasonable) that it paid Mrs. Wechsler for that year. See secs.
1.162-7(a), 1.162-9, Income Tax Regs.
B. Reasonable Compensation to Gilbert
Petitioner has failed to establish that any portion of the
amounts in issue paid by petitioner to Gilbert for its 1992 and
1993 fiscal years is reasonable compensation. Petitioner has not
persuaded us that Gilbert performed any services of value for
petitioner during the years in issue. Consequently, we sustain
respondent’s determinations that the $80,359 and $108,097 paid by
petitioner to Gilbert for its 1992 and 1993 fiscal years,
respectively, are not deductible by petitioner under section
162(a)(1).
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