Normandie Metal Fabricators, Inc. - Page 17

                                       - 17 -                                         
          he was underpaid.  We disagree.  Petitioner relies on Dorf’s                
          testimony that Isidore Klein’s salary in 1993 and 1994 was                  
          reasonable because Isidore Klein was somewhat underpaid in                  
          earlier years and had no long-term financial incentives and                 
          benefits.  Dorf’s conclusion that Isidore Klein was underpaid in            
          earlier years is unconvincing because he disregarded large                  
          bonuses that petitioner paid Isidore Klein in 1984, 1988, and               
          1989.  Dorf’s testimony does not establish and there is no                  
          evidence that petitioner intended any of Isidore Klein’s pay in             
          1993 and 1994 to be catchup pay.  See Pacific Grains, Inc. v.               
          Commissioner, 399 F.2d 603, 606 (9th Cir. 1968) (court found that           
          corporate president was not underpaid in part because taxpayer's            
          board did not state that some part of the payments were for his             
          prior services), affg. T.C. Memo. 1967-7; H&A Intl. Jewelry, Ltd.           
          v. Commissioner, T.C. Memo. 1997-467 (pay was not catchup pay               
          where minutes from shareholder meetings showed that the                     
          compensation for the current year was not intended to reward the            
          employee's efforts for prior years).                                        
               Petitioner points out that Isidore Klein was trying to                 
          develop a portable housing system in 1993 and 1994 and contends             
          that it could have increased petitioner’s annual revenue from $4            
          million to $50 million.  However, there is no credible evidence             
          that the portable housing system could have generated $50 million           
          of revenue.  The fact that Steven Klein abandoned work on the               






Page:  Previous  7  8  9  10  11  12  13  14  15  16  17  18  19  20  21  22  23  24  25  26  Next

Last modified: May 25, 2011