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petitioner’s early years of operation. However, he also noted
that Mr. and Mrs. Myers were extremely well compensated
commencing with petitioner’s 1993 fiscal year. Mr. Packard
opined that petitioner’s undercompensation of Mr. and Mrs. Myers
in prior years had been fully remedied by the beginning of the
1996 fiscal year in issue.
From January 1, 1987 through July 31, 1996, petitioner
paid Mr. and Mrs. Myers the annual amounts of compensation and
had the net income (before taxes and officer compensation) set
forth below.
Total
FYE Officer
July 31 Mr. Myers Mrs. Myers Compensation Net Income
1987 $30,000 $6,750 $36,750 $58,299
1988 54,500 12,950 67,450 141,745
1989 43,000 15,050 58,050 104,705
1990 83,000 29,650 112,650 158,100
1991 173,600 12,500 186,100 251,012
1992 165,000 65,000 230,000 233,852
1993 457,785 156,000 613,785 689,195
1994 630,750 271,750 902,500 1,192,457
1995 455,000 247,500 702,500 778,656
1996 749,500 364,300 1,113,800 1,051,896
We agree that Mr. and Mrs. Myers received relatively modest
compensation during petitioner’s early years of operation, and
that petitioner’s business in those years was not generating
sufficient net income for it to have paid Mr. Myers and Mrs.
Myers substantially higher compensation and also to have repaid
the $77,237 of advances. As Mr. and Mrs. Myers testified, during
those early years, they took less annual compensation in order to
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