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to petitioner that it pay a dividend, nor has petitioner ever
paid a dividend.
Bonuses
Petitioner paid to Haff a $625,000 bonus in late 1990. On
December 17, 1990, December 15, 1991, and December 17, 1992,
petitioner paid identical bonuses of $625,000, $475,000, and
$250,000, respectively, to Emile and Louise. Petitioner did not
use a formula to decide the amount of any of these bonuses.
Instead, Haff met with Rubin in December of each year to set the
amounts of the bonuses primarily on the basis of petitioner’s
profit for the corresponding year. Haff, upon discussions with
Emile and Louise in their capacity as board members, set the
amounts of the bonuses at the amounts suggested by Rubin. Haff
never discussed the payment of a dividend when he discussed the
subject bonuses with Rubin, Emile, or Louise.
Petitioner apportioned to Parker and HCC $100,000 of each
bonus paid to Louise and Emile in 1990 and 1991, and petitioner
deducted as “Officers’ Compensation” the remaining amounts paid
to Louise and Emile. Petitioner deducted Haff’s bonus as “Cost
of Goods Sold”. For the respective subject years, petitioner
deducted the following types and amounts of compensation paid to
Emile and Louise:
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