-7-
for the farm, but he also points to several factual
inconsistencies that discredit petitioners’ characterization of
Mrs. Francis as an employee of the farm. Specifically, Mrs.
Francis performed services for the farm for many years before
1997 (the year her employment agreement was executed), Mrs.
Francis performed services for their son’s farming operation
without being treated as an employee of the son’s operation, and
petitioners’ son performed services on the farm without being
treated as an employee. While these facts are troubling,6 we
need not determine whether Mrs. Francis was a bona fide employee
of the farm to decide this case. Even assuming arguendo that
Mrs. Francis was a bona fide employee,7 we find that petitioners
failed to prove that any compensation paid to Mrs. Francis in
excess of $1,998 was reasonable in amount given that petitioners
failed to document any hours or times Mrs. Francis may have
performed services for the farm.
Whether amounts paid to an employee are reasonable
compensation for services rendered is a question of fact to be
5(...continued)
(9th Cir. 1988).
6Equally as troubling is respondent’s argument that no bona
fide employer-employee relationship existed, yet respondent
conceded that petitioners were entitled to deduct $1,998 of
“wages” paid to Mrs. Francis.
7If we were to find Mrs. Francis was a bona fide employee,
respondent would concede that the claimed employee benefit plan
expense would be an ordinary and necessary expense.
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