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52 (1972), Mr. Ostrove has failed to offer any evidence of intent
on the part of petitioner’s officers and directors to compensate
Mrs. Harrison for such prior services, see Pac. Grains, Inc. v.
Commissioner, 399 F.2d 603, 606 (9th Cir. 1968), affg. T.C. Memo.
1967-7; R.J. Nicoll Co. v. Commissioner, supra at 52. Nor has he
offered evidence as to the amount of any prior years’
undercompensation or shown that it has not been more than offset
by payments to Mrs. Harrison for taxable years before the audit
years. At least since 1979, Mrs. Harrison’s compensation has
annually exceeded that of her sons, each of whom has exercised
greater management responsibility on petitioner’s behalf than
she. Thus, any earlier undercompensation of Mrs. Harrison was
most likely remedied before the audit years. See LabelGraphics,
Inc. v. Commissioner, 221 F.3d at 1096-1097; B & D Founds., Inc.
v. Commissioner, supra. It is also noteworthy that the briefs
filed on petitioner’s behalf make no attempt to defend the
reasonableness of Mrs. Harrison’s compensation during the audit
years on the basis of prior years’ undercompensation.
Mr. Ostrove states that “Mrs. Harrison negotiates and brings
in the contracts.” That conclusion is directly contrary to the
parties’ stipulation at trial that “[f]rom 1989 through the years
in issue, Mrs. Harrison did not represent the petitioner in
negotiation of any contracts between petitioner and the cities,
nor did she communicate with employees of the cities with regard
to the implementation of the contracts.”
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