- 37 -
during those years almost fourfold to approximately 6 to 10 hours
per week.
We decline respondent’s invitation to decide petitioner’s
intent in making the disputed payments to Beiner. This case is
not one of those “rare [cases] where there is evidence that an
otherwise reasonable compensation payment contains a disguised
dividend * * * [so that our] inquiry may expand into compensatory
intent apart from reasonableness”. Elliotts, Inc. v.
Commissioner, 716 F.2d at 1244-1245; cf. O.S.C. & Associates,
Inc. v. Commissioner, 187 F.3d 1116 (9th Cir. 1999). Contrary to
respondent’s assertion, petitioner did not ascertain Beiner’s
compensation simply by ascertaining the earnings that it needed
to retain in its operation and the earnings that it had to expend
to avoid the accumulated earnings tax of section 531. Petitioner
set Beiner’s salary at $50,000 per month at or before the
beginning of the subject years, and it ascertained Beiner’s bonus
for each of those years by taking into account petitioner’s sales
and profit for that year, Beiner’s work during that year, and the
amount of petitioner’s profits that petitioner needed to retain
for its future operation. Indeed, after the bonuses were paid
for the subject years, petitioner even retained a meaningful
amount of its earnings upon which it paid significant Federal
income taxes.
Page: Previous 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 NextLast modified: May 25, 2011