Woodruff Lumber Co. v. Commissioner , 6 B.T.A. 515 ( 1927 )

OPINION.

MillikeN:

The only question presented is whether the salary of $20,000 paid to each of the two officers during 1920 was reasonable compensation for personal services actually rendered in that year. The evidence is all to the effect that the compensation paid was reasonable compensation for the services rendered. The two officers were men of long experience in the lumber business. They were responsible for the successful growth of the business in former years, as well as its successful operations in 1920. They kept in close touch with the markets and were skillful buyers. The unusual sales of 1920 were due almost entirely to their efforts. The net profits of the petitioner corporation for 1920, after the salaries and all other expenses had been paid, represented a return of 16.94 per cent on the average investment for the year. The ratio of net profits to average investment for 1920 is greater than the average over the five-j^ear period from 1911 to 1921.

We are of the opinion that, measured by the results accomplished, both from the standpoint of volume of business transacted and profits to the corporation arising therefrom, the salaries paid to its officers were not unreasonable or excessive for the services rendered. The deficiency will be recomputed, allowing the $40,000 salary deduction claimed.

Judgment will be entered on 15 days’ notice, under Rule 50.