Brewer Quality Homes, Inc. - Page 11

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                                       Table 3                                        
                                                  Claimed compensation                
          Claimed         as % of taxable income                                      
          Claimed      compensation as    before deduction of                         
          Year    compensation  % of gross sales    Jack’s compensation               
          1986      $24,195          1.0                  39.9                        
          1987       79,413          2.6                  80.0                        
          1988      164,292          4.6                  91.2                        
          1989       84,581          2.5                 127.5                        
          1990      175,164          5.0                 101.0                        
          1991      129,828          4.5                 105.7                        
          1992       25,174          0.9                  17.5                        
          1993       25,818          0.6                   7.1                        
          1994      398,638          6.1                  80.3                        
          1995      762,186          8.5                  82.0                        
          1996      863,559          8.7                  85.1                        
               In 1995, petitioner paid $62,186 in salary to Jack over the            
          course of the year.  On December 31, 1995, petitioner paid an               
          additional $700,000 to him as a bonus.  In 1996, petitioner paid            
          $63,559 in salary to Jack over the course of the year.  On                  
          December 31, 1996, petitioner paid an additional $800,000 to him            
          as a bonus.  Jack determined the amount of his bonus each year              
          after he and J. Michael Sledge (hereinafter sometimes referred to           
          as Sledge) examined petitioner’s financial situation.  Sledge, a            
          certified public accountant, has been petitioner’s accountant               
          since its incorporation and Jack’s accountant since 1975.  Sledge           
          prepared petitioner’s tax returns for both of the years in issue,           
          and signed those tax returns as paid preparer.  He represented              
          petitioner and Jack during the audit stage that led to the                  
          instant case.  He met with Jack at least quarterly every year to            
          review the financial performance of the company and another 20-30           





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