John L. Ginger Masonry, Inc. - Page 25

                                       - 25 -                                         
          1971-200.  However, it is permissible to pay and deduct                     
          compensation for services performed in prior years.  Lucas v. Ox            
          Fibre Brush Co., 281 U.S. 115, 119 (1930).                                  
               a. Compensation for Services in Prior Years                            
               Financial stability was a crucial element in petitioner's              
          growth strategy.  Ginger knew that petitioner would need strong             
          financial statements and considerable equity in order to work               
          with the large developers.  To this end, Ginger received less               
          compensation in years prior to the years in issue.  Petitioner,             
          as a result, retained a significant portion of its earnings and             
          increased its equity base.  After petitioner reached its                    
          financial goals and secured a working relationship with the large           
          developers, petitioner compensated Ginger for the extraordinary             
          services he provided petitioner from 1984 to 1989.                          
               b. Compensation Paid to Other Employees                                
               Wieder concluded that petitioner's other employees, such as            
          superintendent, bookkeeper, and administrative assistant, were              
          all paid above-average compensation from 1986 to 1992 with above-           
          average pay increases most of those years.  Hakala concluded that           
          petitioner's other employees, specifically Sawhill and Adams,               
          were undercompensated.  Hakala opined that an estimator,                    
          Sawhill's position, would earn $70,000 and up to $100,000 in a              
          very good year.  Included in the $100,000 figure is a bonus of up           








Page:  Previous  8  9  10  11  12  13  14  15  16  17  18  19  20  21  22  23  24  25  26  27  Next

Last modified: May 25, 2011