T.C. Memo. 1996-129
UNITED STATES TAX COURT
PULSAR COMPONENTS INTERNATIONAL, INC., Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 15172-92. Filed March 14, 1996.
Held: Compensation paid by P to two of its
officers/shareholders is reasonable. Both officers had
the appropriate education and employment background for
their positions with P, worked long hours for the
company and its predecessor, and helped increase its
gross sales in a volatile market. The success of the
business required great expertise in trading computer
chips and microprocessors. These qualities were
especially exemplified during the taxable year at issue
when P proved profitable even though it faced adverse
economic conditions. Moreover, P's retained earnings
grew, and P paid regular dividends. Although P paid
the officers more compensation than provided for in
their employment agreements, all of their compensation
was reasonable in light of the significant appreciation
in the value of P's stock and other facts and
circumstances.
Charles R. Goulding and Michael S. Press, for petitioner.
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