EXACTO SPRING CORPORATION V. COMMISSIONER 196 F.3d 833 (7th Cir. 1999) CASE BRIEF

EXACTO SPRING CORPORATION V. COMMISSIONER

196 F.3d 833 (7th Cir. 1999)

NATURE OF THE CASE: This was a dispute over the application of 162(a)(1) for ordinary and necessary business expenses. Exacto (D) appealed from a Tax Court decision holding that the chief executive officer's salary was unreasonably high and assessing a deficiency accordingly.

FACTS: Exacto (D) engaged in the manufacture of precision springs. It was a close corporation and paid it founder $1.3 million and $1.0 million in salary for 1993 and 1994. The IRS determined that this amount was excessive and that Heitz should not have been paid no more than $381,900 and $400,000. The differences were then attributed to D. D appealed and the Tax Court found that the maximum reasonable compensation for Heitz would have been $900,000 and $700,000. D appealed.

ISSUE:

RULE OF LAW:

HOLDING AND DECISION:

LEGAL ANALYSIS:

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