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giving him for that year a total bonus of $54,027.2
As indicated previously, Mrs. Martin received a $33,060
"bonus" for 1990. This "bonus" was not determined pursuant to
any fixed bonus formula.3
Petitioner's annual financial statements for its fiscal
years from July 1, 1980, through June 30, 1990, reflect the
following annual gross receipts and net profit or net loss after
taxes:
Net Profit 0r (Net Loss)
FYE JUNE 30 Gross Receipts After Taxes
1981 $313,131 $38,482
1982 688,887 77,435
1983 954,902 66,425
1984 2,178,100 264,330
1985 2,692,567 184,821
1986 3,049,560 148,154
1987 3,545,513 179,645
1988 4,821,650 376,062
1989 4,581,509 382,755
1990 4,346,972 (98,639)
Its annual financial statements for this period further
reflect the following total assets and net assets:
2Mike's $54,027 total bonus consisted of (1) the $10,000
regular bonus he earned under the bonus formula petitioner had
adopted for him in 1988, and (2) the $44,027 special bonus he
received "in recognition of his contribution to the manufacturing
operations of the corporation." Neither the regular nor the
special bonus to Mike was challenged by respondent.
3In the notice of deficiency issued to petitioner,
respondent originally determined that no portion of petitioner's
$53,660 of purported total compensation to Mrs. Martin for its
fiscal year ended June 30, 1990, was deductible as reasonable
compensation. As a result of a settlement concluded between the
parties, they now agree that half of this $53,660 (which includes
the $33,060 "bonus" to her) is deductible by petitioner.
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