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Respondent “agrees that Mr. Brewer brought enthusiasm,
dedication[,] and energy to the Petitioner, and that the company
experienced great growth during the mid 1990s; however,”
respondent contends that any amounts paid to Jack in excess of
$604,117 for 1995 and $485,966 for 1996 were not intended as
payments purely for personal services,4 and even if they were so
4 On answering brief, petitioner contends as follows:
The Respondent contends that a portion of the payments
are disguised dividends. * * *
The issue as to whether the payment of compensation was
purely for services is not before the Court.
The Notice of Deficiency did not raise the issue of
disguised dividends or the compensatory nature of the
services, or assert that any portion of the payment was a
disguised dividend. * * * It is unfair to the Petitioner
after close of the trial to raise a new issue that being
that the payment received by Mr. Brewer was for something
other than the services he rendered. * * *
The Petitioner contends that only the amount of
compensation the Court may find is in excess of a reasonable
amount, if any, be declared to be a dividend, and that the
Respondent not be allowed to dispute the compensatory nature
of the payments to Mr. Brewer.
For the following reasons, we conclude that the issue of
whether any part of petitioner’s payments to Jack was disguised
dividends, rather than intended compensation for personal
services, is properly before the Court.
Firstly, the notice of deficiency explanation includes the
alternative that disallowed amounts were not “expended for the
purposes designated.”
Secondly, the first sentence of respondent’s opening
statement before the trial is as follows:
(continued...)
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