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Penalty
Year Deficiency Sec. 6662
1993 $130,822 $26,164
1994 135,336 27,067
1995 120,550 24,110
In an amendment to answer filed January 7, 1999, respondent
contends that petitioner’s deficiencies are $163,173 for 1993,
$155,139 for 1994, and $141,328 for 1995, and that petitioner is
liable for penalties of $32,635 for 1993, $31,028 for 1994, and
$28,266 for 1995.1
After concessions, the issues for decision are:
1. Whether petitioner may deduct as compensation for
Isidore Klein and Steven Klein for 1993, 1994, and 1995, the
amounts shown below as the parties contend, or some other amount:
Year Isidore Klein Steven Klein Total
Petitioner
1993 $352,000 $500,400 $852,400
1994 368,000 450,400 818,400
1995 15,000 820,400 825,400
Respondent
1993 $405,250
1994 392,157
1995 444,284
1 Respondent does not dispute this amount.
We hold that petitioner may deduct $500,000 in 1993, $500,000 in
1 Petitioner bears the burden of proving the reasonableness
of compensation it paid in excess of what respondent determined
was reasonable. See Rule 142(a). Respondent bears the burden of
proving the increases in deficiency and sec. 6662 penalty
asserted in the amended answer. See id. However, our decision
does not depend on which party bears the burden of proof.
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Last modified: May 25, 2011