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the employer intended to compensate the employee for past
undercompensation, and (2) the amount of the undercompensation.
Pac. Grains, Inc. v. Commissioner, 399 F.2d at 606; Estate of
Wallace v. Commissioner, 95 T.C. at 553-554.
We conclude that none of the payments in issue were intended
to compensate either Emile or Louise for past undercompensation.
In addition to the fact that petitioner alleged in its petition
that the compensation was all attributable to the efforts of
Emile and Louise during the subject years, the payment of the
extremely large bonuses to them began in 1990, around the time
that the family lawsuit was initiated. Petitioner’s payment of
these large amounts of cash obviously reduced its value and,
correspondingly, the amount of petitioner’s value that was
attributable to the disputed shares. In their capacity as
defendants in the family lawsuit, Emile and Louise, the
recipients of the bonuses, also were most likely incurring large
expenses in defending against the lawsuit and were facing the
possibility of a large damage award by virtue of an adverse
ruling against them. We also observe that petitioner had
sufficient resources in 1989 and in each of the subject years to
pay Emile and Louise any additional amount that it purportedly
believed was due to them for their services, that the bonuses
were ascertained arbitrarily at the end of each year, and that
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