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efforts. Id.
Petitioner concedes that Mr. Henderson should be classified
as an employee for purposes of Federal employment taxes. Mr.
Henderson worked approximately 32 hours a week for petitioner
during the years in issue. The services performed by Mr.
Henderson for petitioner during the years in issue were more than
minor. Mr. Henderson clearly performed regular and substantial
services for the corporation. In fact, the services Mr.
Henderson performed for petitioner were integral to the
corporation’s operations and income-producing activities.
Petitioner’s other employees only assisted Mr. Henderson.
In 1995 and 1996, petitioner reported ordinary income on its
Federal income tax returns of $217,985 and $380,559,
respectively. Mr. Smith testified that during the years in issue
petitioner did not pay Mr. Henderson a salary. Additionally, in
1995 and 1996 there were no distributions of dividends to Mr.
Henderson in his capacity as sole shareholder. It was Mr.
Smith’s testimony that “None of the profits, to my knowledge,
were distributed during the years 1995 and 1996.” Mr. Smith also
testified that “it was the decision of management that no
distribution should be made.” However, the corporation paid
personal expenses of Mr. Henderson in 1995 and 1996 totaling
$96,766 and $143,221, respectively. Respondent does not contest
the reasonableness of these payments. Mr. Henderson clearly
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