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On October 24, 1994, Mr. Damron and his wife entered into a
Marital Settlement Agreement which stated that petitioner’s stock
was worth $1,200,000. In 1995, Mr. Damron and his wife were
divorced as a result, in part, of his grueling work schedule. In
July 1996, Mr. Damron and his wife were remarried.
III. Compensation
During 1985 through 1991, petitioner’s accountant formulated
compensation for Mr. Damron and Mr. Owen reflecting base salaries
and bonuses. Mr. Damron’s bonus was 10 percent of wholesale
sales. Petitioner paid Mr. Damron only a portion of the
compensation thus formulated, resulting in underpayments of
$191,251, $278,963, $359,903, $430,370, $437,280, $587,340, and
$364,332, relating to 1985 through 1991, respectively. Effective
February 20, 1990, Mr. Damron, his wife, and Mr. and Mrs. Owen
signed a Capital Accumulation Verification (Verification)
forgiving any debts petitioner owed them.
During 1992 through 1995, petitioner’s accountant formulated
Mr. Damron’s bonus as 10 percent of wholesale sales or, if less,
50 percent of any excess of petitioner’s income (i.e., after
wages) over $500,000, or 25 percent of any such excess over
$250,000. Petitioner’s payments to Mr. Damron and gross profits
were as follows:
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Last modified: May 25, 2011