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settlement and after effecting an inflation increase
for 1996, the following salaries, and the bonuses set
forth in paragraph 6 below, are hereby fixed for the
following Officers until further action of the Board.
William L. Myers $586,500
Connie J. Myers $288,500
6. Payment of Bonus. The Board of Directors
hereby authorize and direct the Officers of this
Corporation to pay bonuses for the fiscal years ended
July 31, 1995 and 1996, to the following Officers in
the amounts set opposite their names:
Total 1995 1996
William L. Myers $163,000 $125,000 $38,000
Connie J. Myers $ 75,800 $ 58,000 $17,800
* * * * * * *
This consent of the Board of Directors when signed
by all of the Directors of this corporation shall have
the same effect as having been unanimously adopted by
vote of the Board of Directors of this Corporation on
the 31st day of July, 1996.[7] The Directors of this
Corporation are as follows:
Approved:
DIRECTORS:
6(...continued)
Income Tax Examination report dated Apr. 18, 1998, of the
revenue agent who examined petitioner’s return for the fiscal
year ended July 31, 1996, stated that “The settlement [for the
earlier 1993 and 1994 fiscal years] is not specific as to how a
reasonable compensation amount was determined.” Indeed,
petitioner now acknowledges no formula was used in settling those
1993 and 1994 tax years.
7The record does not disclose the date on which petitioner’s
directors, Mr. and Mrs. Myers, had signed the Memorandum of
Action. Respondent did not question whether the salaries and
bonuses authorized by the Memorandum, which petitioner deducted
on its return for the year ended July 31, 1996, were actually
paid to Mr. and Mrs. Myers during that year.
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