*107OPINION.
Smith:Under the Eevenue Act of 1918, under which the taxpayer’s income-tax return for 1918 was made, a corporation is permitted to deduct from gross income, among other items, “ all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business, including a reasonable allowance for salaries or other compensation for personal services actually rendered * *
In the instant case the taxpayer contends that the additional compensation to the amount of $5,200 paid to its president and treasurer constitutes ordinary and necessary expenses of the taxable year 1918. The Commissioner contends that the amount is not deductible for the reason that it was paid for services performed by its officers during the years 1915 and 1916 and therefore are not legal deductions from the gross income of the year 1918.
From the evidence before it the Board is of the opinion that there was no element of a gift in the payment by the taxpayer of the amounts of $3,250 to the president, and $1,950 to the treasurer during the year 1918. Both of these officers had devoted their time and attention to the business of the taxpayer over a series of years and had received very moderate salaries. By reason of unsatisfactory business conditions during the years 1914 and 1915 the taxpayer had lost a considerable amount of its capital and the officers had voluntarily accepted a reduction in salary.
During the year 1918 the treasurer protested to the president that they could not live on the salaries that they were getting and that inasmuch as the corporation was then in a position to pay them larger salaries he thought that larger salaries should be paid. The corporation thereupon paid additional compensation in 1918, measured by the reduction of salaries which had been sustained by the two officers from January 4, 1915, to April 2, 1916. The fact that the measure of the additional compensation was the amount of the reduction in salaries suffered during the period above mentioned is not proof that the additional amounts paid for 1918 were not in reality additional compensation for services performed by the officers during the year 1918. The Board is of the opinion that the additional amounts paid are legal deductions from the gross income of the taxpayer for 1918 as ordinary and necessary expenses of operation.