-6-
On its 1987 fiscal year return, petitioner deducted the amount
of salary and bonus ($1,777,800) it paid Mr. Leonard.
In 1985, Mr. Leonard and his wife initiated divorce
proceedings, and in 1987, they divorced. Pursuant to their
property settlement, Mr. Leonard provided his former wife money and
property valued at $1.68 million.
OPINION
The U.S. Court of Appeals for the Ninth Circuit has directed
us to further explain the method we employed to arrive at $700,000
as reasonable compensation for Mr. Leonard in 1987. Leonard
Pipeline Contractors, Ltd. v. Commissioner, 142 F.3d at 1136. With
the discussion that follows, we attempt to provide the Court of
Appeals with "a trail" to follow as to how we reached our prior
conclusion. See Akers v. Commissioner, 798 F.2d 894, 897 (6th Cir.
1986), revg. and remanding T.C. Memo. 1984-208; Estate of Gilford
v. Commissioner, 88 T.C. 38, 50 (1987); Symington v. Commissioner,
87 T.C. 892, 904 (1986).
3(...continued)
personally guaranteed by him. Not until now, with the
contract completed and the benefits from subsequent
grading and fencing contracts awarded being realized,
is the corporation in a position to adequately
compensate its President for his unique and extremely
profitable contribution to the corporation.
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