Wagner Construction, Inc. - Page 2




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               The issue for decision is whether petitioner may deduct as             
          officer compensation paid to Dennis Wagner (Dennis) and Curtis              
          Wagner (Curtis) for taxable years ending October 31, 1995 and               
          1996, the amounts shown below as the parties contend, or some               
          other amounts:                                                              
                                     Petitioner                                       
               Year             Dennis          Curtis         Total                  
               10/31/95       $1,048,200     $246,688       $1,294,888                
               10/31/96       699,192        400,573        1,099,765                 
                                     Respondent                                       
               Year             Dennis          Curtis         Total                  
               10/31/95       $243,000       $192,450       $435,450                  
               10/31/96       258,600        202,350        460,950                   

               Unless otherwise indicated, all section references are to              
          the Internal Revenue Code, as amended and in effect for the years           
          in issue, and all Rule references are to the Tax Court Rules of             
          Practice and Procedure.                                                     
                                  FINDINGS OF FACT                                    
               Some of the facts have been stipulated and are so found.               
          The stipulation of facts and the attached exhibits are                      
          incorporated herein by this reference.                                      
          A. General Background                                                       
               Petitioner is a Minnesota corporation that was incorporated            
          on November 1, 1985.  When the petition in this case was filed,             
          petitioner maintained its principal place of business in                    
          International Falls, Minnesota.                                             







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