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Internal Revenue Service as Federal income tax. The proceeds of
the bonus checks were immediately returned to petitioner in
exchange for promissory notes dated June 29, 1990. The bonuses
that were paid to petitioner’s employees during the calendar year
1990, other than amounts paid to its officers, were each less
than $1,000.
The total compensation (salary and bonus) deducted by
petitioner for its tax years was as follows:
1984 1985 1986 1987 1988 1989 1990
Linda
Burton $22,078 0 $ 600 $11,000 $24,000 $59,225 $751,750
Alfred
Burton 7,957 $2,625 4,800 8,950 7,000 7,100 217,750
Robert
Denovan 0 0 0 0 800 3,500 110,750
Petitioner had a group medical and life insurance plan for all of
its employees, including its officers. The officers decided to
take their compensation in the form of salary and bonuses and not
to adopt a pension or other retirement plan. Petitioner did not
pay dividends.
Respondent determined that the amount of compensation that
was paid to the above individuals was unreasonable. The salaries
that were claimed were allowed as reasonable compensation, but
bonuses were reduced as follows:
Ms. Burton’s salary $ 51,750
Bonus allowed 258,880
Total allowed $310,630
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