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Respondent contends that petitioner did not pay Mr. Damron
to make up for past undercompensation because he had signed the
Verification. We conclude that the Verification is irrelevant
and that it did not preclude petitioner from paying for past
services. See Lucas v. Ox Fibre Brush Co., 281 U.S. 115, 119
(1930) (stating that “compensation for past services, it being
admitted that it was reasonable in amount in view of the large
benefits which the corporation had received as the fruits of
these services, the corporation had a right to pay, if it saw
fit”). Even if portions were not attributable to past services,
our conclusion would not change.
Accordingly, we hold that Mr. Damron’s salary during the
years in issue was reasonable.
II. Additions to Tax
Section 6651(a)(1) imposes an addition to tax for failure to
file a required return on the date prescribed, unless it is shown
that such failure is due to reasonable cause and not willful
neglect. Petitioner’s 1993 and 1994 returns were due on July 15,
1994, and July 17, 1995, but not filed before November 18, 1994,
and August 2, 1995, respectively. Petitioner presented no
evidence relating to this issue and did not address it on brief.
It has not been shown that such failure is due to reasonable
cause and not willful neglect. Accordingly, petitioner is liable
for the section 6651(a)(1) additions to tax.
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