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Exacto Spring Corporation v. Commissioner

United States Court of Appeals for the Seventh Circuit
196 F.3d 833 (1999)



William Heitz was the cofounder, chief executive, and principal owner of Exacto Spring Corporation (Exacto) (plaintiff). Exacto paid Heitz $1.3 million in 1993 and $1.0 million in 1994. The Commissioner (defendant) held that the most Heitz should reasonably have received was $381,000 in 1993 and $400,000 in 1994. The Commissioner determined that Exacto could not deduct any compensation beyond those figures as salary for personal services rendered. The Tax Court calculated figures halfway between Heitz’s compensation and the Commissioner’s determination and held that the most Heitz should reasonably have received was $900,000 for 1993 and $700,000 for 1994.

Rule of Law


Holding and Reasoning (Posner, C.J.)

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