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distributions to Isidore and Steven Klein were in part disguised
dividends. See Owensby & Kritikos, Inc. v. Commissioner, 819
F.2d at 1325. We believe Isidore Klein decided the amount of his
compensation late in 1993 and 1994, and Steven Klein late in
1995, so that they could receive a greater part of petitioner's
net profits as compensation.
Petitioner contends that petitioner did not pay Steven Klein
bonuses in 1995; petitioner contends that the amount of the
yearend payments to Steven Klein were determined shortly after
the redemption of Isidore Klein’s stock in consultation with the
outside accountants and that petitioner did not pay it until
yearend to protect its cash-flow. We disagree. Unlike the
payments to Isidore Klein, petitioner did not compensate Steven
Klein based on a compensation formula. Steven Klein owned all of
petitioner’s stock in 1995 and set his own compensation that
year. The large yearend payments to Steven Klein in 1995 suggest
that part of his payments were disguised dividends.
We believe that an independent investor would not have been
satisfied with the large amount petitioner paid to Steven Klein
the last week of 1995 since it appears that profits were being
“siphoned out of the company disguised as salary.” See Dexsil
Corp. v. Commissioner, 147 F.3d at 101; Elliotts, Inc. v.
Commissioner, 716 F.2d 1241, 1247 (9th Cir. 1983), revg. and
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