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2This figure comes from a schedule prepared by petitioner.
Mohney’s return shows the amount received from only one of the
three, $59,702. The discrepancy was not explained.
Under his usual “consulting” arrangement, the amount and timing
of payments Mohney received were not fixed in advance, but varied
based on his assessment of the company’s performance and its
needs.
Mohney’s “consulting” relationship with petitioner conformed
to the general pattern. From the founding of the company through
the taxable years at issue, Mohney exercised the highest
executive responsibilities and actively participated in making
and implementing major corporate decisions. In petitioner’s
early years of operation he designed the floor plan for the
complex, negotiated the purchase of the building site, oversaw
construction of the building, and procured merchandise and
credit. In 1988 he hired Jacqueline Hagerman (Hagerman) to serve
as petitioner’s president, and the determination of her annual
salary was his responsibility. During the years at issue he was
consulted on a regular basis by Hagerman and the other management
concerning administration, operations, promotions, advertising,
and the myriad legal problems that arose in regard to zoning,
building code compliance, and restrictive ordinances.
Hagerman moved to Michigan in 1990 and Donald Krontz
(Krontz) was hired as manager to supervise daily operations in
her absence. It was these two with whom Mohney regularly worked.
Both understood that there was a preexisting consulting agreement
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