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The Amount of Compensation Paid to Mr. Haviv in the
Previous Years.
Petitioner contends that part of Mr. Haviv's payment for
1991 and 1992 was for services rendered in prior years. Under
some circumstances prior services may be compensated for in a
later year. Lucas v. Ox Fibre Brush Co, 281 U.S. 115 (1930);
Estate of Wallace v. Commissioner, 95 T.C. at 553. However, it
is incumbent on a taxpayer claiming that part of the payment to
an officer in the current year is for services rendered for prior
periods to show that the officer was not sufficiently compensated
in the prior year and that in fact the current year's
compensation was to compensate for that underpayment. Pacific
Grains, Inc. v. Commissioner, 399 F.2d at 606; Home Interiors &
Gifts, Inc. v. Commissioner, 73 T.C. at 1156.
There is evidence in the record to show that Mr. Haviv may
not have been paid in full for the services he rendered to
petitioner in the years 1983 to 1987. Before creating
petitioner, Mr. Haviv had worked for several years for other
employers in the jewelry industry. Mr. Haviv was the sole
purchaser, supervised most sales, and traveled overseas for
petitioner. The record shows that petitioner paid Mr. Haviv
$10,000, $25,000, $25,000, and $47,000, in 1984, 1985, 1986, and
1987, respectively. However, we do not find any evidence, with
the exception of Mr. Haviv's unsupported testimony, that Mr.
Haviv's compensation in 1991 and 1992 was to compensate for his
underpayment of prior years. The minutes from the shareholder
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