- 4 -
bonus on his individual income tax return (Form 1040) for the
1990 calendar year.
In March 1993 Revenue Agent Mockus began an examination of
petitioner’s tax return for FYE 5/31/90. Mr. Cunniff represented
petitioner in three meetings with the revenue agent in March,
April, and August 1993. The treatment of the bonus was among the
issues discussed at the initial meeting. Mr. Mockus informed
Mr. Cunniff that under section 267(a)(2), as amended, petitioner
would have been entitled to deduct the bonus for FYE 5/31/90 only
if it paid the bonus before the close of that year. Mr. Cunniff
admitted that both he and Mr. Petar had mistakenly believed that
under the circumstances the law still permitted compensation to
be deducted for the year accrued so long as payment was made
within 2-1/2 months after the close of the year. Following the
initial meeting Mr. Mockus mailed to Mr. Cunniff photocopies of
the relevant provisions of the statute and regulations together
with the explanatory comments and annotations published in the
Standard Federal Tax Reports (CCH). These materials addressed
the issue of whether a promissory note qualified as payment for
purposes of section 267(a)(2).
At the second meeting Mr. Cunniff and Mr. Mockus discussed
further the revenue agent’s proposed disallowance of the bonus
deduction, but did not reach agreement. Mr. Cunniff agreed to
all other proposed adjustments. A third meeting, which Mr. Petar
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Next
Last modified: May 25, 2011