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essentially all profits7 to the shareholder surgeons as salary
for services performed by them was based upon a good faith belief
that such was the case. Cf. Comenout v. Commissioner, T.C. Memo.
1982-40, affd. 746 F.2d 1484 (9th Cir. 1984).
Although it happened that, for the audit years, profits
attributable to the nonshareholder surgeons were small (and, for
1995, practically nil), such need not have been the case. For
example, in 1996, collections attributable to Dr. Vaughan (still
a nonshareholder surgeon), totaled just under $460,000 as
compared to $491,000 for Dr. Mann. Under such circumstances,
the shareholder surgeons could not reasonably conclude that all
pre-distribution profits were solely attributable to services
performed by them and, therefore, available for bonus payments to
them. It is the shareholder surgeons’ utter indifference to the
possibility that a portion of the annual prebonus profits might
have been derived from collections generated by nonshareholder
surgeons that justifies respondent’s imposition of the accuracy-
related penalty in this case.
7 Based upon Dr. Mann’s testimony that the bonuses to the
shareholder surgeons consisted of all available cash less the
amount necessary to meet anticipated expenses, we find that the
small amount of taxable income reported for each of the audit
years ($29,255 for 1994 and $49,323 for 1995) was no more than
the yearend set-aside needed to meet anticipated immediate and
near-term expenses for the following year.
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