No, not an extract from the 1984 Starship opus “We Built This City”, that won Rolling Stone’s “worst song of the 80s” title for Bernie Taupin, Martin Page, Dennis Lambert and Peter Wolf, but the story of Aries Communications Inc. & Subs., 2013 T.C. Memo. 97, filed 4/10/13, with Judge Wherry being more mathematical than whimsical.

But even though the issue is the reasonableness, and therefore deductibility, of executive compensation, the star of our show is N. Arthur Astor, radioman first class.

Judge Wherry: “N. Arthur Astor has been in radio broadcasting for over 60 years. He was involved in several television shows, did a little film work, and worked as a talent in radio broadcasting before he decided to become involved in broadcasting sales. After many years of managing sales for a multitude of different radio broadcasting companies, Mr. Astor in June 1970 was employed as general manager of KADY, a 50,000-watt radio station in Los Angeles owned by Atlanta-based Rollins Broadcasting. In 1975 he was employed by Dratch & Knott Enterprises, which owned three radio stations and was the number one programing company supplying programing and special features to radio stations nationally.” 2013 T.C. Memo. 97, at p. 3. Two “m”s in “programming”, Judge, but it’s radio, right?

NAA starts buying radio stations as owner-operator. Aries is his flagship, but he has various subsidiaries. “Mr. Astor was Aries’ president, chief financial officer (CFO), and sole shareholder from its incorporation in 1983. Mr. Astor acted as general manager of each of petitioner’s radio stations. He was a ‘hands-on’ manager who was actively involved in many aspects of petitioner’s day-to-day operations. Mr. Astor’s duties included: (1) oversight of petitioner’s other management personnel; (2) planning and overseeing the execution of programming; (3) negotiating and communicating with petitioner’s lenders; (4) participating in sales meetings; and (5) communicating with outside advisers (such as lawyers and accountants).” 2013 T.C. Memo. 97, at p. 5.

Aries ran into tough times, but NAA sold off stations from Aries’ stable for top dollar, and guaranteed loans that kept Aries afloat while he haggled and higgled for the last centime out of other would-be czars of the airwaves.

When Aries finally had cash on hand, he voted himself a handsome bonus. Aries took the Section 162 deduction, and IRS said no, disguised dividend.

So we’re back to comparable pay for comparable work (like women who still are fighting that fight), and when that fails, our hypothetical friend, the unrelated investor looking for maximum return.

Now the comparable pay gambit means a regression analysis, which, Judge Wherry explains “…is a statistical technique designed to determine the effect that one or more explanatory independent variables have on a single dependent variable. This method may allow an expert to test the causal relationship, if any, between the explanatory independent variables and the dependent variable.” 2013 T.C. Memo. 97, at p. 14, footnote 9.

So we have the duelling experts and judicial mix-and-match extracted from their opinions, with such oracular pronouncements as “(3) on the basis of the P-values of the coefficients in all of the regressions, the coefficients are not useful; and (4) on the basis of the R-squareds of the regressions, the regressions do not explain the variation in either the fixed compensation or the variable compensation.” 2013 T.C. Memo. 97, at p. 15.

Reminds me of Malvolio’s celebrated comment in “Twelfth Night”: “…this is my lady’s hand these be her very C’s, her U’s and her T’s and thus makes she her great P’s.” Act II, Scene V.

Finally, however, NAA’s rescue gets some reward above what IRS would allow, notwithstanding Aries’ barely going-concern state and NAA’s total control of its affairs. NAA gets compensated for previous years when he was underpaid. And Aries gets to deduct about one-third of what it paid NAA.

But because neither NAA or anyone else can say what info Aries gave its accountants, who prepared the returns for the years at issue, it’s 20%-penalty time.