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Niesar Pahl. Petitioner’s duties, among other things, included
supervising Niesar Pahl’s billing and payment procedures,
establishing bank accounts, hiring and firing employees, and
attending to the line of credit with the bank. Petitioner
provided his own property as security for the line of credit with
the bank.
No other employees of Niesar Pahl who were not shareholders
received a compensation package equivalent to what petitioner
received. Among other items of compensation, petitioner received
an annual salary of $180,000 and an automobile allowance of
$6,500 (the automobile allowance). Petitioner’s receipt of the
automobile allowance for 1990 is reflected on a Form 1099-MISC,
Miscellaneous Income (the Form 1099), issued to petitioner for
1990 by Niesar Pahl and showing nonemployee compensation of
$6,500.
Petitioner’s Disassociation From Niesar Pahl
On June 30, 1990, petitioner and Gosselin left Niesar Pahl.
Petitioner and Gosselin departed pursuant to an agreement (the
separation agreement). Pursuant to the separation agreement,
Niesar Pahl transferred to petitioner and Gosselin furniture and
equipment with an agreed value of $34,875 and assigned accounts
receivable to them in the amount of $135,000. In consideration
thereof, among other things, Pahl and Gosselin assumed Niesar
Pahl’s credit line with the bank in the amount of $242,500,
agreed that the June 30, 1990, employee payroll of $105,539 would
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