Brewer Quality Homes, Inc. - Page 2

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                       MEMORANDUM FINDINGS OF FACT AND OPINION                        
               CHABOT, Judge:  Respondent determined deficiencies in                  
          Federal corporate income tax against petitioner as follows:                 
                              Year           Deficiency                               
                           1995              $123,602                                 
                           1996              144,411                                  
               After concessions by respondent,1 the issue for decision is            
          the extent to which amounts that petitioner paid to Jack are                
          deductible as reasonable compensation under section 162(a)(1).2             











               1  In the notice of deficiency, respondent disallowed (1)              
          $338,941 of the $783,930 of officer compensation that petitioner            
          paid to Jack R. Brewer, Sr. (hereinafter sometimes referred to as           
          Jack), and Mary L. Brewer (hereinafter sometimes referred to as             
          Mary) in 1995, and (2) $397,759 of the $881,559 of officer                  
          compensation that petitioner paid to Jack and Mary in 1996.                 
               Respondent concedes that (1) all payments of officer                   
          compensation to Mary are deductible, and (2) additional portions            
          of the payments to Jack are deductible.  After respondent’s                 
          concessions, there remain in dispute only $158,069 of the                   
          original $338,941 disallowance for 1995, and only $337,593 of the           
          original $397,759 disallowance for 1996.                                    
               2  Unless indicated otherwise, all section references are to           
          sections of the Internal Revenue Code of 1986 as in effect for              
          the taxable years in issue.                                                 




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