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compensation. Owensby & Kritikos, Inc. v. Commissioner, 819 F.2d
1315, 1325-1326 (5th Cir. 1987), affg. T.C. Memo. 1985-267.
However, no particular ratio between compensation and gross or
net taxable income is a prerequisite for a finding of
reasonableness. Id. at 1326.
Over the period January 1, 1987, through July 31, 1996,
petitioner had the annual gross receipts and net income (before
taxes and officer compensation)19 set forth below.
FYE July 31 Gross Receipts Net Income
1987 $423,987 $58,299
1988 856,623 141,745
1989 742,876 104,705
1990 978,152 158,100
1991 1,407,191 251,012
1992 2,053,999 233,852
1993 3,247,464 689,195
1994 3,289,189 1,192,457
1995 3,638,980 778,656
1996 4,561,878 1,051,896
From January 1, 1987 through July 31, 1996, the annual
compensation paid Mr. and Mrs. Myers represented the percentages
of petitioner’s gross income and net income (before taxes and
officer compensation) set forth below:
19The net income figure given for the fiscal year ended July
31, 1996, is net of the $92,681 that petitioner contributed to
the qualified retirement plan it established for petitioner’s
employees that year. No breakdown is available as to the portion
of the $92,681 contribution that would benefit Mr. and Mrs. Myers
as opposed to petitioner’s other employees. The record does
reflect that Mr. and Mrs. Myers were among the employees who
would benefit under the plan. It is thus likely that most, if
not substantially all, of the contribution would benefit them.
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