- 41 - probative of a presence or absence of compensatory intent.” Id. at 1246 n.4. In this case, Mrs. Harrison’s 46-percent stock ownership interest (with the other 54 percent in the hands of nonadverse family members) indicates the existence of a potential conflict of interest. Moreover, there are several indications of an intent to disguise profit distributions to Mrs. Harrison as deductible salary payments: (1) Petitioner has never declared or paid a dividend, see O.S.C. & Associates, Inc. v. Commissioner, 187 F.3d 1116, 1121 (9th Cir. 1999), affg. T.C. Memo. 1997-300; (2) during the audit years, petitioner’s total deduction for officer compensation, on average, equaled 92 percent of pretax income before that deduction, and Mrs. Harrison’s compensation alone averaged 35 percent of pretax income for that period, see Owensby & Kritikos, Inc. v. Commissioner, 819 F.2d at 1325-1326; Pac. Grains, Inc. v. Commissioner, 399 F.2d at 607; O.S.C. & Associates, Inc. v. Commissioner, T.C. Memo. 1997-300; (3) officer compensation was determined after the close of the taxable year, when profits for the year were either known or could be estimated with reasonable accuracy, see Owensby & Kritikos, Inc. v. Commissioner, supra at 1329; Ecco High Frequency Corp. v. Commissioner, 167 F.2d 583, 585 (2d Cir. 1948), affg. a Memorandum Opinion of this Court; Rich Plan of N. New England, Inc. v. Commissioner, T.C. Memo. 1978-514. Petitioner attempts to discount the potential impact of any circumstances indicative of disguised dividends or profitPage: Previous 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 Next
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