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penalties under section 6662(a).1 For the respective years,
respondent determined deficiencies of $877,861, $495,884, and
$300,438 and accuracy-related penalties of $138,952, $69,965, and
$33,423.
Following concessions,2 we must decide the following three
issues:
1. Whether the bonuses petitioner paid during the subject
years to two of its officers, Emile and Louise, were “reasonable”
within the meaning of section 162(a)(1). We hold they were not.
2. Whether petitioner is liable for the accumulated
earnings tax of $490,924, $240,902, and $130,438 determined by
respondent for the respective years. We hold it is.
3. Whether petitioner is liable for the accuracy-related
penalties determined by respondent. We hold it is not.
1 Unless otherwise indicated, section references are to the
Internal Revenue Code applicable to the subject years. Rule
references are to the Tax Court Rules of Practice and Procedure.
Percentages are rounded.
2 Among other things, petitioner has conceded that it paid
$85,414 in legal fees during 1990 as a nondeductible personal
expense of its controlling shareholder, Louise Haffner Fournier
(Louise), and her husband, Emile Fournier (Emile).
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