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meetings of December 26, 1991, and December 30, 1992, make no
reference to Mr. Haviv's efforts outside of the respective year
at issue. The minutes from the 1991 meeting authorize a $562,000
bonus to Mr. Haviv "for performance rendered during 1991 and for
the superior efforts associated with the `red' diamond and for
the day to day management of the Company." The minutes for the
1992 meeting also demonstrate that the board of directors did not
intend to compensate Mr. Haviv for prior years' underpayment:
The President presented tentative operating statistics
for the year which reflected 10% increase in sales (20%
if the prior year extraordinary sales were eliminated),
a strengthening of the gross profit percentage and a
moderate increase in operating costs. This all
occurred in a recessionary economy. The Board stated
the President was performing beyond their expectations
and congratulated him for his extraordinary efforts.
Resolved, that for performance rendered during 1992 for
the above stated reasons, the Board authorizes the
following bonuses: Haim Haviv $535,000, Amy Haviv $500.
We find that petitioner did not intend Mr. Haviv's compensation
for 1991 and 1992 to include compensation for prior years.
Upon scrutinizing all of the facts and circumstances
presented here before us, we find petitioner's compensation
deduction unreasonable. We also find that respondent's absolute
reliance on the RMA survey was erroneous. On the basis of the
entire record, we hold that $429,000 for 1991 and $305,000 for
1992 constituted reasonable compensation to Mr. Haviv for
services rendered.
Decision will be
entered under Rule 155.
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