- -10
over its gross sales for its fiscal year 1989. The bonus plan
provided as follows:
RESOLVED FURTHER, that the Board of Directors have
evaluated various incentive compensation programs and have
determined that the most appropriate method for determining
and measuring the performance and contribution of its
officers to this Corporation during a fiscal year is through
the application of a fixed formula which calculates the
incentive amount by multiplying a fixed percentage times the
net * * * increase in gross sales volume of the Corporation
for its current fiscal year over the immediately preceding
fiscal year.
RESOLVED FURTHER, that the Board of Directors of the
Corporation have determined that the standard percentage
within the industry in which the Corporation engages is ten
percent (10%) and that this amount represents a fair
incentive. As such, the Corporation shall make available
for distribution to its officers a gross bonus pool amount
equal to ten percent (10%) of the gross increase in sales of
this Corporation for its fiscal year ending July 31, 1990
over its gross sales for its fiscal year ending July 31,
1989.
RESOLVED FURTHER, that the gross bonus amount available
for distribution shall be distributed to its officers not
later than ninety (90) days following the close of its
fiscal year. Each officer shall be entitled to receive a
distribution from the bonus pool in an amount which equals
the ratio of an officer's annual compensation (without
regard to the bonus) to all officers' compensation
multiplied against the gross bonus pool.
Isaac Blumberg (Mr. Blumberg) was the outside accountant for
petitioner during the year at issue and for some years prior and
subsequent thereto. Mr. Blumberg performed a number of services
for petitioner during the year at issue, including preparing
financial statements, consulting on tax issues, and performing
other tax work. Mr. Blumberg also participated in designing the
bonus plan for the fiscal year 1990 for petitioner. For the
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