39
compensate for the prior underpayments. Estate of Wallace v.
Commissioner, 95 T.C. 525, 553-554 (1990), affd. on another
ground 965 F.2d 1038 (11th Cir. 1992).
As we have seen supra note 6, earlier growth was not so
extraordinary. In any case, Mr. Munro was highly compensated in
earlier years,18 so no reason was shown to reward him in
1986-1987 for what he had done earlier. Moreover, there is
nothing in the record to indicate that any of the compensation
paid to Mr. Munro in 1987 was earmarked as being for prior
services; the absence of any earmarking supports the view that
petitioners' argument in this regard is a mere afterthought.
Pacific Grains, Inc. v. Commissioner, 399 F.2d at 606.
On balance, this factor supports upholding normal chief
executive officer compensation for the current year for Mr.
Munro.
(d) Conflict of Interest
This fourth factor focuses on whether a relationship exists
between petitioners and the employee (here Mr. Munro) that might
permit them to disguise nondeductible corporate distributions of
income as deductible salary expenditures. Such a relationship
may exist where the employee is a business's sole or controlling
18In 1986, the salary income reported on Mr. and Mrs.
Munro's joint income tax return was $596,316. We have no
evidence for 1984 and 1985. In 1983, Mr. Munro's salary was
$309,504. In 1982, it was $231,500. In 1979, 1980, and 1981, it
was $240,000.
Page: Previous 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 NextLast modified: May 25, 2011