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1. Whether respondent violated the prohibition of section
7605(b) against a second examination of petitioner's books of
account for 1993. We hold he did not.
2. Whether section 162(a) allows petitioner to deduct the
$1,750,000 as compensation. We hold it does.
Unless otherwise indicated, section references are to the
Internal Revenue Code in effect for the applicable years. Rule
references are to the Tax Court Rules of Practice and Procedure.
Dollar amounts are rounded to the nearest dollar.
FINDINGS OF FACT
Some of the facts have been stipulated. The stipulation of
facts and the exhibits submitted therewith are incorporated
herein by this reference. Petitioner is a corporate law firm
that specializes in State and municipal employee pension benefits
and the litigation thereof. It uses the cash method for Federal
income tax purposes and an accrual method for book purposes. Its
principal place of business was in Detroit, Michigan, when its
petition was filed.
Richard Ashare, an attorney, incorporated petitioner in 1974
with a capital contribution of $1,000. Mr. Ashare is
petitioner's sole shareholder and one of its two employees.
Petitioner's other employee is Mr. Ashare's secretary, Kathleen
Moore Baker (Ms. Moore). Petitioner has three directors: Mr.
Ashare, his wife, Marlene, and his longtime tax adviser, Barry
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