- 27 -
regardless of Kleindienst's additional functions as a corporate
officer and manager.
Petitioner contends that it had a longstanding and
consistently applied compensation plan. Compensation as a
percentage of gross receipts that is within the range of
percentages from previous years indicates an informal,
consistently applied compensation plan. L&B Pipe & Supply Co.
v. Commissioner, T.C. Memo. 1994-187; Mortex Manufacturing. Co.
v. Commissioner, T.C. Memo. 1994-110. Petitioner did not use a
predetermined formula to calculate Kleindienst's base salary or
bonus. Rather, each year Kleindienst met with petitioner's
accountant to determine her salary from a stated list of
subjective criteria. Kleindienst's compensation rested
completely within her own discretion. Thus, we attach little
weight to the fact that Kleindienst's compensation as a
percentage of gross revenue during the years in issue fell
within the range of percentages from prior years.
Based on these considerations, we find that reasonable
compensation for Kleindienst for taxable years ended July 31,
1989 and July 31, 1990, is $450,000 and $460,000, respectively.
To the extent that arguments of each party were not addressed
herein, we find them to be without merit.
Addition to Tax Under Section 6661
Page: Previous 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 NextLast modified: May 25, 2011