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Inc. v. Commissioner, supra at 1247.
Petitioner's "unusually high", "extraordinary one time" 1990
bonus of $722,913 to Mr. Martin represented a departure from its
normal annual bonus practice for him. As reflected by minutes of
the June 17, 1988, board meeting, petitioner's directors' usual
practice had been to tie Mr. Martin's annual bonus, in large
part, to petitioner's financial performance during the recent
fiscal year. Yet, Mr. Martin's 1990 bonus was almost three times
the size of his 1988 bonus of $250,000, even though petitioner
enjoyed significantly higher gross receipts (as well as a
substantially higher net profit after taxes) for its 1988 fiscal
year than for its 1990 fiscal year.
We do not accept petitioner's and its expert's arguments
that the 1990 bonus of $722,913 was justified because of Mr.
Martin's instrumental efforts in developing the Micro Clean 100
process. Although petitioner's directors anticipated the
resulting clean room labels would be significantly profitable in
future years, petitioner's later financial success with the new
labels was by no means certain as of the end of the 1990 fiscal
year. Most importantly, we do not believe that an independent
investor would approve of paying Mr. Martin this large $722,913
"bonus", when the new labels' profit prospects were still
uncertain and yet to be confirmed. While Mr. Martin is entitled
to some 1990 bonus for his efforts in developing petitioner's
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