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services, and (b) the amount of the past undercompensation. See
Pac. Grains, Inc. v. Commissioner, 399 F.2d 603, 606 (9th Cir.
1968), affg. T.C. Memo. 1967-7; Estate of Wallace v.
Commissioner, 95 T.C. 525, 553 (1990), affd. 965 F.2d 1038 (11th
Cir. 1992); Haffner’s Serv. Stations, Inc. v. Commissioner, T.C.
Memo. 2002-38; Wagner Constr., Inc. v. Commissioner, T.C. Memo.
2001-160.
The parties stipulated that petitioner’s board of directors
meeting minutes indicate that in the tax year ended June 30,
1985, petitioner intended to compensate its shareholder-employees
for past services. The record shows that the amount of
compensation paid in that tax year was much larger than it had
been in 19833 and the 4 subsequent years. This indicates that
the payments were intended to rectify past undercompensation for
services rendered. No such stipulation exists for the years in
issue, and no board of directors meeting minutes for the years in
issue are in the record.
Additionally, in each tax year ending June 30, 1992 through
1996, the total compensation for a shareholder-employee of
petitioner generally increased or remained consistent. During
each tax year ending June 30, 1997 through 1999, each of
petitioner’s shareholder-employees received less total
3These figures are taken from the expert reports. There are
no compensation figures for 1984 in either report.
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