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reasonable compensation is unnecessary if the taxpayer properly
completes Form 1120, Schedule E, Compensation of Officers,
including the percent of time each officer devoted to the
business. Petitioner did not adequately disclose the facts
relating to the Kleins’ compensation on its 1993, 1994, and 1995
returns because it left blank the "percent of time devoted to
business" section of its 1993, 1994, and 1995 Schedules E.
Petitioner contends that its failure to list the percentage
of time petitioner’s officers devoted to the business is not
significant because the Kleins each devoted a substantial amount
of time to the business. We disagree. See C.T.I. Inc. v.
Commissioner, T.C. Memo. 1994-82 (taxpayer’s disclosure was
inadequate because it did not state the percentage of time its
officers devoted to the business).
We do not believe that the issues in this case were highly
technical. Petitioner does not contend that it relied on its
accountant to advise it on the reasonable compensation issue for
1993 and 1994. Thus, we conclude that petitioner is liable for
the accuracy-related penalty under section 6662 for 1993 and
1994.
2. 1995
Respondent argues that petitioner did not have reasonable
cause for deducting the compensation it paid to Steven Klein in
1995 because it made no attempt to determine whether the amount
it deducted as compensation in 1995 was reasonable. We disagree.
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