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compensation from petitioner until petitioner followed proper
corporate formalities in awarding that compensation. Respondent
cites petitioner’s bylaws which provide:
Officers and other employees of the corporation shall
receive such salaries or other compensation as shall
be determined by resolution of the Board of Directors,
adopted in advance or after the rendering of the
services, or by employment contracts entered into by
the Board of Directors. * * *
The parties have stipulated that petitioner made no corporate
resolution authorizing or allocating the compensation prior to
the end of petitioner’s fiscal year. Nor did petitioner
introduce any documentary evidence to suggest that petitioner
took any action whatsoever to authorize or determine the amount
of the compensation prior to the end of its fiscal year.
Petitioner relies entirely on oral testimony to support its
claim that the compensation was authorized prior to the end of
petitioner’s fiscal year. But Doyce Gentry’s testimony was
unclear and contradictory. He initially testified on redirect
examination that he could not recall ever informing his
accountant how much compensation to accrue:
Q. Did you ever advise Mr. Livengood how much he
should accrue or how much should be accrued with
regard to your compensation?
A. I can’t recall that I ever did.
Q. Well, how did he know how much that he was
supposed to put on the books with regard to the
accrual?
A. Well, he and I-–I could tell by the bank
statements and information that he was giving me
there that there was excess money there that
needed-–that doesn’t necessarily need to be kept
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Last modified: May 25, 2011