Clary Hood Inc. v. Commissioner (T.C. Memo. 2022-15)
On March 2, 2022, the Tax Court issued a Memorandum Opinion in the case of Clary Hood Inc. v. Commissioner (T.C. Memo. 2022-15). The primary issue presented in Clary Hood Inc. was the amount the petitioner may deduct under IRC § 162(a)(1) as reasonable compensation paid to its chief executive officer (CEO) and shareholder Clary L. Hood (Mr. Hood) during the years at issue. Background to Clary Hood Inc. v. Commissioner According to Judge Greaves To understand Clary Hood, Inc., one must first know Mr. Hood. Mr. Hood learned construction, land grading, excavation, and even how to repair the machinery from an early age from his father. By 1980, Mr. Hood decided to create his own path (which he was good at, because, you know, the whole construction and land grading skillset). The petitioner, Clary Hood Inc., started with only two employees and a hodgepodge of used equipment valued at…