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indicated. All dollar amounts are rounded to the nearest dollar,
unless otherwise indicated. After concessions, the sole issue
before the Court is whether the amount of executive compensation
paid to Mr. Haim Haviv for 1991 and 1992 is unreasonable, and if
so, what reasonable compensation is. We find the amounts paid to
be unreasonable under section 162(a)(1).
Some of the facts have been stipulated and are so found.
The stipulated facts and the accompanying exhibits are
incorporated into our findings by this reference.
Petitioner, an international jeweler, is a Georgia
corporation with its principal place of business in Dunwoody,
Georgia, an unincorporated suburb of Atlanta.
General Background
H&A International Jewelry, Ltd.
Mr. and Mrs. Haviv are the sole shareholders of petitioner.
Each owns 50 percent. Mr. and Mrs. Haviv contributed $500 to
capital upon petitioner's incorporation. Since petitioner's
incorporation, Mr. Haviv has served as its president and chairman
of the board of directors, and Mrs. Haviv has served as its
secretary. Petitioner has never paid any dividends.
Petitioner (1) conducts wholesale and retail sales of
jewelry and precious stones, (2) appraises and insures precious
stones, and (3) custom designs and repairs jewelry. Petitioner
became a company unique in specialty, reputation, location, and
purchasing power.
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