Lumber City Corporation, f.k.a. Neiman-Reed Lumber and Supply Company, Inc. - Page 19

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          The 1987 deferred compensation arrangement was terminated as of             
          January 31, 1989.  In its audited financial statement for its               
          fiscal year ended February 29, 1988, petitioner expensed $871,000           
          in deferred compensation with respect to the 1987 deferred com-             
          pensation arrangement.  That expense was the only expense                   
          reflected in its financial statements for the years at issue with           
          respect to that arrangement.  During petitioner's fiscal year               
          ended February 28, 1989, petitioner paid $933,333 to Mr. Ruf                
          pursuant to the 1987 deferred compensation arrangement.15                   
               Petitioner did not pay Mr. Ruf a base salary in either of              
          its fiscal years ended February 28, 1990, or February 28, 1991.             
          The $2,600,000 of compensation petitioner deducted in its Federal           
          income tax return for its taxable year ended February 28, 1990,             
          was not paid to Mr. Ruf pursuant to a plan.                                 
          Petitioner's Financial Results                                              
               According to its financial statements, petitioner had the              
          following sales, net income after taxes (but before utilization             
          of net operating loss carryforwards/carrybacks), and sharehold-             
          er's equity for the years indicated:                                        

          15  The record does not explain how petitioner calculated the               
          $871,000 it expensed in its financial statement for its fiscal              
          year ended Feb. 29, 1988, with respect to the 1987 deferred                 
          compensation arrangement or the $933,333 it paid to Mr. Ruf                 
          during its fiscal year ended Feb. 28, 1989, with respect to that            
          arrangement.                                                                






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