- 2 -
Additions to Tax
Section Section Section Section Section
Year Ended Deficiency 6653(a)(1)(A)16653(a)(1)(B) 6653(a)(1) 6653(a)(2) 6661(a)
Feb. 29, 1988 $352,217 $17,611 * $ -- -- $88,054
Feb. 28, 1989 398,225 -- -- 19,911 * 99,556
Section
Year Ended Deficiency 6662(a)
Feb. 28, 1990 $863,235 $172,647
Feb. 28, 1991 366,344 73,269
* 50 percent of the interest due on the portion of the underpayment attributable to
negligence.
The only issue remaining is to determine the amount of the
deduction for petitioner's taxable year ended February 28, 1990,
to which petitioner is entitled under section 162(a)(1) for
reasonable compensation paid to Jesse Ruf, its sole shareholder
and chief executive officer (CEO). We hold that the amount of
the deduction to which petitioner is entitled is $1 million.
FINDINGS OF FACT2
Petitioner, Lumber City Corp. (Lumber City), is a California
corporation whose principal place of business was in Van Nuys,
California, at the time the petition was filed.
Petitioner was formed in 1948 by Robert Neiman (Mr. Neiman)
and Robert Reed (Mr. Reed) as Neiman-Reed Lumber and Supply Co.,
Inc. Petitioner began operations as a wholesale lumber operation
and expanded to include a chain of retail home and garden im-
1 All section references are to the Internal Revenue Code in
effect for the years at issue. All Rule references are to the
Tax Court Rules of Practice and Procedure.
2 Except as noted, the record is unclear as to the timing of
certain events. However, the inadequacy of the record in that
respect does not affect our resolution of the issue presented.
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011