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Myers and retired. In late 1986, petitioner was incorporated to
conduct the foundation and flat work contracting business
previously operated by the B & D partnership and by Mr. Myers.
Upon incorporation of petitioner, Mr. and Mrs. Myers
invested $10,000 in its capital stock; Mr. Myers received 51
percent of petitioner’s outstanding shares of common stock, and
Mrs. Myers received the other 49 percent. Mr. and Mrs. Myers
have owned these same stock interests throughout petitioner’s
existence (including the year in issue, ended July 31, 1996).
Mr. and Mrs. Myers also made advances to petitioner of
$77,237, which were shown on petitioner’s books and income tax
returns as debt. The record does not show how the advances were
divided between Mr. and Mrs. Myers or whether petitioner paid
interest on them. Petitioner paid off these advances over the
first 4 years of its existence.
Since 1987, when petitioner began operations, Mr. and Mrs.
Myers have played complementary roles as the only members of its
management team. Mr. Myers has handled all work in the field,
and Mrs. Myers has maintained petitioner’s books and provided all
administrative support. In 1987, petitioner employed about 10
construction workers. Over the years, petitioner has employed up
to 35 to 40 construction workers, depending on work volume.
Throughout petitioner’s existence, Mr. Myers, during peak
construction periods, has worked long hours to accomplish a
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Last modified: May 25, 2011