- 33 -
The record here shows no payments of dividends by BI, except
to GSI to buy out Mr. MacDonald, until a rearrangement of
financial affairs was made for BI, GSI, and Mr. Schoenecker in
1990 when it was determined to be advantageous to get real estate
out of the ownership of BI or GSI. The real estate was declared
as a dividend by BI to GSI and by GSI to Mr. Schoenecker, and a
cash dividend was declared for Mr. Schoenecker to use to pay the
taxes on the real estate dividend. The main business offices of
BI were located on the real estate declared as a dividend to Mr.
Schoenecker. Neither BI nor GSI had a regular dividend policy.
In evaluating Mr. Schoenecker's ability as a
CEO, it should be noted that he was also the CEO of Animal Fair,
which was not very successful in its operations.
From the record here, we conclude that Mr. Schoenecker set
his salary in the years here involved on a basis to take out of
the company as salary amounts he wished to withdraw from the
company, and not on the basis of a reasonable salary which would
have been paid in an arm's-length transaction.
This record is clearly inadequate to establish the amount of
a reasonable salary for Mr. Schoenecker. However, there are
indications that a reasonable salary for Mr. Schoenecker would be
in excess of the amounts allowed by respondent in each of the
years in issue. In fact, respondent in her brief requests as an
ultimate finding of fact, that "Reasonable compensation for Guy
[Mr. Schoenecker] as CEO was in the range of $354,920 to $415,100
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