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Finally, petitioner invokes section 7522, which, among other
things, states that deficiency notices in income tax cases “shall
describe the basis for, and identify the amounts (if any) of, the
tax due”. The notice sets forth deficiencies in tax and, as
noted in the preceding paragraph, describes the basis for that
portion of the proposed deficiencies attributable to the
principal adjustments as petitioner’s failure to establish that
the disallowed amounts were for officers’ compensation.
Respondent has complied with section 7522.
F. Conclusion
Respondent has not raised a new matter. Petitioner bears
the burden of proof.
II. Deductibility of Payments to Shareholder Surgeons
A. Introduction
Petitioner, a cash method taxpayer, paid its four
shareholder surgeons $1,300,231 and $1,528,125 during 1994 and
1995, respectively, and deducted such amounts (the return
amounts) as officers’ compensation on its Federal income tax
returns for such years. After initially disallowing $598,710 and
$805,469 of such deductions, respondent now agrees that
petitioner may deduct $1,159,455 and $1,508,675 for 1994 and
1995, respectively, as compensation for services. That leaves
for our decision respondent’s disallowance of deductions for
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