Pulsar Components International, Inc. - Page 12

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          Petitioner deducted the following Officers' compensation on its             
          Federal corporate income tax returns for those years as follows:            
               Taxable                                                                
               Year Ended              Deduction Claimed                              
               July 31       Mr. Laviano    Mr. Woll        Total                     
               1983           $11,000       $15,000       $26,000                     
               1984           729,000       720,000     1,449,000                     
               1985         1,461,000     1,461,000     2,922,000                     
               Total      2,201,000     2,196,000     4,397,000                       

          A comparison of the Officers' compensation and their stock                  
          ownership interests is as follows:                                          
               Taxable                                                                
               Year Ended                                                             
               July 31      Mr. Laviano (55%)          Mr. Woll (40%)                 
               1983             42.3%                       57.7%                     
               1984              50.3                       49.7                      
               1985             50.0                        50.0                      
               d.  Board Resolution Concerning Undercompensation                      
               Petitioner's board met on August 6, 1984, and reported that            
          each of the Officers was actually paid less than the amounts that           
          were fixed in their employment agreements.  Specifically, the               
          board found, the Officers were entitled to receive $650,000 per             
          year, but were actually paid the following amounts:                         
                                        1983       1984                               
               Thomas Laviano           $11,000    $729,000                           
               Peter Woll               15,000     720,000                            
          The board decided that petitioner owed Mr. Laviano $560,000 and             
          that petitioner owed Mr. Woll $565,000.  The board unanimously              






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