Court Opinion

ID: 6801830
Source: CourtListenerOpinion
Date Created: 2022-07-23 18:42:51.65619+00
Date Added: 2024-06-11T16:03:16.505654
License: Public Domain

*1115OPINION.
Trussell
: The record of this appeal contains testimony to the effect that the customary charges, or commissions, for the collection of rents in the City of New Orleans in 1921 was 5 per cent of the rents collected, and that usual commissions upon sales of real estate were approximately 3 per cent of the sale prices. In this connection, however, it will be observed that the taxpayer is claiming a deduction for commissions upon rents collected in the amount of $3,259.30, and reporting gross income from rents in the amount of $26,904.35. Five per cent upon the gross rent collection does not equal the amount of commissions claimed as a deduction. It is also observed that the total of all the figures of purchase and selling prices of real estate transactions described is not such an amount that 3 per cent thereof will equal the $18,558 claimed as a deduction for commissions thereon. It must further be observed that, although a res©-*1116lution of the taxpayer’s board of directors authorizing compensation ■of officers fixed the executive salary of the president at $6,000, in making its original income-tax return it only claimed $4,000 as ■compensation paid to such officer.
Upon the record as herein shown it appears that the question for •our determination is not what the corporation authorized to be paid to its president, or what amount was actually paid to him, but what is the reasonable compensation which the law authorizes the taxpayer to take as a deduction. The gross income of the taxpayer for the year was $68,832.43. It paid to one of its officers, a son of the president, a salary of $4,200. It appears to have paid $2,500 to other persons employed by it. The president owned more than two-thirds of the stock of the taxpayer corporation. He appears to have been its principal managing and directing head, and to a considerable extent his activities produced the gains and profits which made up its gross income. We are of the opinion that a reasonable compensation for his services, under the circumstances disclosed by the record, is the amount of $12,000 for the year 1921, and that the taxpayer’s net income should be readjusted upon that basis.
Order of redetermination will be entered on 15 days’ notice, under Rule 50.