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1985 and 1986, which relate to petitioner’s taxable years ending
March 31, 1985 and 1986, respectively, show that petitioner’s
board of directors provided Atkinson with a salary and bonuses.
The minutes do not provide any other form of compensation for
Atkinson. Petitioner’s board of directors never authorized any
additional compensation for Atkinson in the form of payments by
petitioner for the construction expenses.
Petitioner’s Treatment of the Construction Expenses on Its Books
and Corporate Tax Returns
To prepare each of petitioner’s corporate tax returns,
Dunkin’s staff visited petitioner’s place of business, retrieved
all pertinent information from its books and records, and
identified questions and issues that needed further addressing.
Dunkin’s staff, however, did not inspect, review, or audit
petitioner’s books. Dunkin then met with Atkinson and the
controller to inform them of his preliminary findings and to seek
answers to the questions and issues raised by his staff and
himself. Based on the answers and information provided by
Atkinson and petitioner’s employees, Dunkin’s staff prepared
petitioner’s corporate tax return. After Dunkin reviewed the
corporate tax return, he sent it to Atkinson for his approval and
signature.
The total cost of the construction of the Carnelian Bay
residence and the improvements to the Carnelian Bay property
amounted to more than $1 million. Of that amount, petitioner
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