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All section references are to the Internal Revenue Code in effect
for the years in issue, and all Rule references are to the Tax
Court Rules of Practice and Procedure. The issues are whether
petitioner is entitled to section 162 deductions relating to
compensation payments in excess of the amounts determined by
respondent and whether petitioner is liable for section
6651(a)(1) additions to tax.
FINDINGS OF FACT
I. Background
Petitioner was incorporated in 1982. It had its principal
place of business in Florida when the petition was filed. From
1982 until 1992, Leonard A. Damron, III, and his sister, Sharon
Owen, owned 51 and 49 percent, respectively, of petitioner’s
stock. Mr. Damron and Mrs. Owen’s husband, Ronald, operated
petitioner, which recycled and sold used auto parts. In 1984,
petitioner’s stock was worth approximately $200,000. On August
12, 1992, Mrs. Owen sold her stock in petitioner and related
corporations to Mr. Damron for $250,000, and Mr. Owen entered
into an employment contract with petitioner. On October 31,
1995, petitioner declared and paid a $7,589 dividend to Mr.
Damron. In 1998, Mr. Damron sold, for $12,500,000, all of
petitioner’s stock to, and became an employee of, LKQ Corporation
(LKQ), a national provider of recycled auto parts. Petitioner’s
gross receipts were as follows:
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