- 29 - 28, 1987, is entirely reasonable given the magnitude of the turn- around he thereby achieved for petitioner during that year.20 It also is entirely reasonable that petitioner desired to sustain its turnaround and attempted to maximize its chances of doing so by requiring Mr. Ruf to continue to provide services to it during the three fiscal years following its fiscal year ended February 28, 1987.21 We further find, based on our examination of the entire record before us (including the testimony of Mr. Lyons and Mr. Ruf, both of whom we found credible on this issue), that peti- 20 On the present record, we reject respondent's contention that Mr. Ruf was not undercompensated during petitioner's fiscal year ended Feb. 28, 1987, because he received an option to purchase petitioner's stock. Respondent did not determine that the receipt of that option resulted in taxable compensation to Mr. Ruf. Nor did she present any evidence to show that the purchase price paid for all of petitioner's stock was less than the fair market value of that stock. Although the stock option was offered to Mr. Ruf in an effort to cause him to decide to join petitioner, it does not necessarily follow that the amount of reasonable compensation that petitioner may deduct for Mr. Ruf's services during its taxable year ended Feb. 28, 1987, is affected by Mr. Ruf's receipt of that option. 21 On the instant record, we reject respondent's contention that, because the $1,500,000 of compensation that petitioner was to accrue under the 1987 deferred compensation arrangement in equal installments of $500,000 for each of its fiscal years ended Feb. 29, 1988, Feb. 28, 1989, and Feb. 28, 1990, was payable "provided only that Jesse Ruf shall complete twelve (12) calendar months of employment during each" of such fiscal years, petition- er awarded the $933,333 of compensation it paid under that arrangement exclusively for services Mr. Ruf provided during its fiscal years ended Feb. 29, 1988, and Feb. 28, 1989.Page: Previous 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 Next
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