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In addition to sales promotions, Menards used its
relationship with TMI to create sales incentives for employees.
For example, in 1997 and 1998, employees who met the performance
requirements for the Indy 500 contest attended an Indy 500
practice where they toured the garage, the pits, and the track;
had access to the hospitality area; and met with the drivers for
photos and autographs.
V. Preparation of Petitioners’ Tax Returns
Since 1991, Stienessen, Schlegel & Co., LLC (the accounting
firm), has served as Menards’s and TMI’s outside accountant and
Mr. Menard’s personal accountant. Joseph G. Stienessen, the
managing member of the accounting firm, has been a certified
public accountant for approximately 30 years. For the years at
issue, the accounting firm prepared petitioners’ income tax
returns and also prepared TMI’s 1997 and 1998 income tax returns.
VI. Respondent’s Determinations and Petitioners’ Petitions
On October 12, 2001, respondent sent to Menards and Mr.
Menard separate notices of deficiency. In the notice sent to
Menards, respondent determined that (1) Menards’s deduction of
$20,642,485 claimed for Mr. Menard’s compensation was
“unreasonable and excessive”; (2) the TMI expenses were not
ordinary and necessary business expenses of Menards and,
therefore, not deductible; and (3) Menards was liable for a
section 6662(a) accuracy-related penalty for negligence or
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