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employment agreements and, for both 1994 and 1995, overhead from
the nonshareholder employment agreements to the shareholder
employment agreements. That would have the effect of reducing
petitioner’s deduction for compensation paid to officers (and
increasing its taxable income for each of the audit years).
Respondent’s position is:
[P]etitioner can deduct as wages the actual net
collections of the shareholder-doctors in 1994 and
1995. The way to arrive at the allowable deductions,
since petitioner’s records were unreliable, was to
subtract from the total compensation paid to the share-
holder doctors the net collections of the non-
shareholder doctors. * * *
3. Determination of Profits Attributable to
Nonshareholder Surgeons
a. Introduction
Petitioner is contradictory in its calculation of any profit
attributable to the nonshareholder surgeons. In one exhibit,
petitioner calculates the profit attributable to Dr. Snyder in
1994 as $20,174 and to Dr. Vaughan in 1995 as $12,579. In
another exhibit, petitioner claims that, for those years, it lost
money by employing Drs. Snyder and Vaughan. Respondent computes
the profit attributable to Drs. Snyder and Vaughan as the
remaining amounts ($140,776 and $19,450, for 1994 and 1995,
respectively). Neither party’s position is persuasive on its
face. The Court must make its own calculation.
During the pretrial conference and, again, at the conclusion
of the trial, the Court elicited from respondent’s counsel that
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