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its carryback of losses from 1991, 1992, and 1993, P's
deficit in retained earnings on Dec. 31, 1993, was
$1,463,768.
Held: R did not conduct a second examination of
P's books of account in violation of sec. 7605(b),
I.R.C.
Held, further, sec. 162(a)(1), I.R.C., allows P to
deduct $1,750,000 in 1993 as reasonable compensation
paid to A.
Gordon S. Gold, David J. Lieberman, and Barry R. Bess,1 for
petitioner.
Trevor T. Wetherington and Robert D. Heitmeyer, for
respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
LARO, Judge: Petitioner petitioned the Court to redetermine
an income tax deficiency of $546,634 for 1990. The deficiency
stems from respondent's determination that petitioner may not
deduct $1,750,000 paid to its shareholder/employee in 1993
reportedly as compensation. Petitioner reported a net operating
loss (NOL) for 1993 that it carried back to 1990.
We must decide the following issues:
1 At the start of trial, the Court allowed Mr. Bess to
withdraw as counsel because he was going to be a witness for
petitioner.
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