PK Ventures, Inc. and Subsidiaries, et al. - Page 139

                                       - 84 -                                         
                        Entity      1986-89    1990      1991                         
                     PK Ventures $170,000 $98,068      $67,469                        
                     SLPC             --     45,000       --                          
                     TBPC             –-     120,000   60,000                         
                     TPTC          --   120,000        60,000                         
                             Total 170,000   383,068   187,469                        
          In sum, Rose received $740,537 for his services to PK Ventures              
          and its subsidiaries during these years.                                    
               With respect to 1992, the IRS determined that the deduction            
          that PKV&S claimed for compensation paid to Rose should be                  
          reduced by $1,208,893.  The IRS determined this reduction by                
          subtracting (1) reasonable salary for 1992 totaling $143,317 and            
          (2) deferred compensation totaling $294,738 from the $1,646,948             
          that PKV&S deducted in that year.  The IRS determined the                   
          reasonable salary for 1992 by multiplying PKV&S’s gross receipts            
          for that year by 3 percent.  The IRS determined deferred                    
          compensation as follows:                                                    
                      Salary                                                          
                    Deducted on   Reasonable                  Deferred                
             Year     Return        Salary     Difference   Compensation              
             1987        -–         $91,634   ($91,634)        $91,634                
             1988        -–         120,800   (120,800)        120,800                
             1989    $170,000       133,739       36,261       (36,261)               
             1990      50,068       159,024   (108,956)        108,956                
             1991    140,469        150,078     (9,609)        9,609                  
             Total    360,537       655,275   (294,738)        294,738                
          As it did in 1992, the IRS determined reasonable salary for 1987            
          through 1991 by multiplying PKV&S’s gross receipts for each of              
          those years by 3 percent.  Accordingly, the IRS increased PKV&S’s           
          taxable income by $1,208,893 for 1992.                                      





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