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