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adequately compensate Mr. Bennett and to reimburse Mr. Bennett by
adequately improving his salary at such future date as the
corporation is in a position to do so." Mr. Sokol also agreed to
work for an amount less than his normal wage rate in return for
petitioner's promise to provide additional future compensation at
such time as petitioner's cash flow permitted.
From incorporation through fiscal year 1989, petitioner paid
Messrs. Bennett and Sokol the following salaries:
FYE Mr. Bennett Mr. Sokol
6/1/78-5/31/79 -0- N/A
6/1/79-5/31/80 -0- $17,000
6/1/80-5/31/81 $20,000 35,000
6/1/81-5/31/82 29,000 31,000
6/1/82-5/31/83 30,000 36,000
6/1/83-5/31/84 43,500 49,500
6/1/84-5/31/85 76,000 76,000
6/1/85-5/31/86 94,000 94,000
6/1/86-7/31/86 15,000 15,000
8/1/86-7/31/87 106,000 106,000
8/1/87-7/31/88 157,855 128,047
8/1/88-7/30/89 1,552,783 305,668
During the years in issue, compensation for Messrs. Bennett
and Sokol was determined on an annual basis by mutual agreement.
Even though Messrs. Bennett and Sokol were equal shareholders
during fiscal years 1990 and 1991, their compensation was unequal
because their contributions and responsibilities were not the
same. In fiscal year 1992, Mr. Sokol's compensation was reduced
significantly reflecting the reduction in his responsibilities
and time commitment.
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