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acknowledges that, because this argument was not set forth in the
statutory notice, respondent bears the burden of proof on this
issue. We are not persuaded that the evidence in the record
supports the conclusion that bonuses were not actually paid
during the tax year in issue. Respondent has not proven that
this case is comparable to Maggio Bros. Co. v. Commissioner,
supra at 1006, where “the stockholders had no intention of
receiving the proceeds of the bonus checks as salary payments in
the respective taxable years”. Id. We do, however, consider the
facts concerning those transactions as part of our analysis of
whether the compensation deducted by petitioner was reasonable.
A second area of dispute between the parties is whether the
bonuses that were paid for the fiscal year ended in 1990 were
intended to compensate the recipients of those bonuses for
undercompensation in earlier years. Ms. Burton, Mr. Burton, and
Denovan each testified credibly that they accepted minimal
compensation in the early developmental years in anticipation
that their efforts would be rewarded in later years. We are
persuaded that the bonuses that were paid in June 1990 were
intended in part to compensate for undercompensation in earlier
years.
Petitioner must also prove that its executive employees were
in fact undercompensated in earlier years. Respondent argues
that the executives were not undercompensated in earlier years
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