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Mrs. Myers during the 1996 fiscal year indicated another $488,000
in “deferred compensation” petitioner agreed to pay was to remedy
its alleged substantial undercompensation of them in prior years.
The Memorandum stated that the board, after an exhaustive review
of the compensation of Mr. and Mrs. Myers since petitioner’s
inception, determined that Mr. and Mrs. Myers had been
substantially undercompensated in prior years. Yet, no
convincing analysis or review data was entered in evidence by
petitioner. Neither petitioner nor its expert Mr. Gelfond
addressed what amount, if any, of catchup pay to Mr. and Mrs.
Myers was still required as of the 1996 fiscal year in issue.
Mr. and Mrs. Myers have been extremely well compensated
since petitioner’s 1993 fiscal year. Hence petitioner’s past
undercompensation of them might very well have been fully
recovered before its 1996 fiscal year in issue. Moreover, the
Memorandum of Board Action is susceptible to the interpretation
that the sole remedy for any undercompensation of prior years was
to be the $488,000 of deferred compensation payments. We
conclude that petitioner has failed to establish that any part of
the salary payments respondent disallowed for its 1996 fiscal
year in issue qualifies as reasonable compensation to Mr. Myers
and Mrs. Myers for past services in prior years. Rule 142(a);
Am. Foundry v. Commissioner, supra; Labelgraphics, Inc. v.
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