T.C. Memo. 2004-207
UNITED STATES TAX COURT
MENARD, INC., Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
JOHN R. MENARD, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket Nos. 673-02, 674-02. Filed September 16, 2004.
MI is an accrual basis taxpayer with a fiscal year
ending January 31. S is a cash basis taxpayer who was
the president, CEO, and 89-percent shareholder of MI
during MI’s TYE 1998. S was also the sole shareholder
and president of TMI, a cash basis S corporation. MI
and TMI have never held ownership interests in each
other.
For TYE 1998, MI paid S compensation of
$20,642,485. S’s total compensation included an annual
bonus equal to 5 percent of MI’s net income before
taxes, subject to a reimbursement agreement, which
required that S repay to MI any amount of S’s
compensation disallowed by R as a deduction. MI has
never paid dividends to its shareholders.
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