- 12 - times a year on an ad hoc basis. He has attended most of the meetings of petitioner’s board of directors since 1977. In determining the amount of a bonus for Jack, Jack and Sledge considered petitioner’s profit situation and the amount of retained earnings necessary to satisfy an investor in petitioner. Jack discussed with Sledge the possibility that the amounts of the 1995 and 1996 bonuses might be viewed as “unreasonable compensation in eyes of the Commissioner” of Internal Revenue. Jack was aware that there were risks involved with petitioner’s payment of the bonuses on the last day of the year. Petitioner’s corporate board minutes for 1995 and 1996 do not reflect any intent to increase Jack’s compensation in those years to make up for Jack’s earlier years’ undercompensated services. E. Distribution and Dividend History Petitioner distributed $116,100 in 1993, as an S corporation. Petitioner distributed $320,949 dividends in 1994, as a C corporation. This was done in accordance with Sledge’s recommendation. The 1993 and 1994 distributions are the only ones petitioner ever made, through the end of 1996. Petitioner did not have any agreements with any banks or financial institutions with which it dealt that prohibited it from declaring dividends for the years in issue.Page: Previous 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 Next
Last modified: May 25, 2011