- 12 - Respondent argues that the annual salary bonus paid to Meyer of $245,905 for 1990 and of $250,000 for 1991 and 1992 constitutes disguised consideration for acquisition of the assets of MCB. Respondent also argues that because Meyer intended to remain with International and because International was already achieving annual net profits of $700,000, the annual net profits contingency was not significant. Petitioners argue that the payments made each year as a salary bonus constitute reasonable compensation for services rendered by Meyer to International and are fully deductible as ordinary and necessary business expenses. We agree with petitioners with regard to the salary bonus. Meyer’s receipt each year of the salary bonus was contingent on Meyer's rendering significant services to International. During each year, Meyer managed the operations and expansion of International, and Meyer maintained virtually all of the former clients of MCB. The earnings of International depended primarily on the efforts of Meyer. In the 2 years prior to the acquisition of the assets of MCB, Meyer received annual salaries from MCB of $600,000 and $800,000. During each of the years in issue and treating the salary bonus as part of his annual compensation for services rendered and not taking into account amounts paid under the covenant not to compete, Meyer's total annual compensation fromPage: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 Next
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