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laus purchased petitioner in December 1986 until Mr. Ruf and the
former shareholders agreed on a final purchase price for peti-
tioner in November 1988, Mr. Neiman retained an interest in
petitioner's profits and net worth in that the final purchase
price for petitioner was to be calculated based on a formula
using those amounts. Prior to, during, and after the years at
issue, Mr. Neiman received and reviewed petitioner's financial
statements, retained an office next to that of Mr. Ruf, and dis-
cussed petitioner's financial condition with Mr. Ruf.
During his testimony, Mr. Neiman indicated that he never
objected to Mr. Ruf's compensation and believed that "it was
right and proper." He also testified that although the original
notes initially restricted the amount of cash that Mr. Ruf was
able to withdraw from petitioner due to its poor cash position,
Mr. Neiman intended for Mr. Ruf to be "justly compensated" as
soon as the cash was available to do so. Thus, Mr. Neiman
specifically approved the concept of retroactive compensation for
Mr. Ruf as petitioner's financial situation improved.
Internal Consistency
The last category of factors identified by the Court of
Appeals relates to whether the compensation at issue was paid
pursuant to a structured, formal, and consistently applied
program. Bonuses not paid pursuant to such plans are suspect.
Elliotts, Inc. v. Commissioner, 716 F.2d at 1247.
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