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it is not liable for the accuracy-related penalty. Rule 142(a);
Welch v. Helvering, 290 U.S. 111, 115 (1933); Neely v.
Commissioner, 85 T.C. 934, 947 (1985).
As petitioner substantially understated its income for
taxable year ended July 31, 1990, it is liable for the accuracy-
related penalty. For the reasons stated above, reasonable cause
for petitioner's excessive compensation does not exist. In
addition, petitioner did not act in good faith in taxable year
1990. Petitioner paid Kleindienst excessive compensation,
including large discretionary bonuses, and left no net income
after taxes. Also, Kleindienst improperly considered the amount
of earnings she wanted petitioner to retain as a factor in
determining her own compensation. Thus, we find petitioner
liable for an accuracy-related penalty under section 6662(a).
Decision will be entered
under Rule 155.
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