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on petitioner’s tax returns, and we accept that aspect of their
opinions.
We conclude that reasonable compensation to Mr. Wechsler for
the years in issue would include petitioner’s payment to him of
(1) the annual salaries he received, (2) for 1999, a payment of
$40,917 to reflect interest, and (3) a yearly bonus equal to 20
percent of petitioner’s adjusted EBFIT before petitioner’s
payment of any bonus to Mr. Wechsler for that year.16
Using the above method for determining Mr. Wechsler’s
compensation, we calculate that reasonable compensation to Mr.
Wechsler for petitioner’s 1992 through 1999 fiscal years in issue
is as follows:
Annual Adj. EBFIT Annual Bonus3
FYE May 31 Salary Adj. EBFIT1 Before Bonus2 and Interest Total Comp.
1992 $390,000 $4,002,465 $8,002,465 $1,600,493 $1,990,493
1993 390,000 6,281,781 10,781,781 2,156,356 2,546,356
1994 390,000 (1,910,871) 4,789,129 957,826 1,347,826
1995 405,000 6,404,771 11,859,771 2,371,954 2,776,954
1996 390,000 12,927,869 17,927,869 3,585,574 3,975,574
1997 390,000 (4,295,611) (3,295,611) -0- 390,000
1998 415,000 2,911,631 9,983,631 1,996,726 2,411,726
1999 571,694 (15,535,385) (14,612,309) 40,197 611,891
1 EBFIT for that year, plus (if any) disallowed, nondeductible compensation for
that year paid by petitioner to Mrs. Wechsler or Gilbert.
2 Adjusted EBFIT for that year, plus December and May bonuses for that year
actually paid by petitioner to Mr. Wechsler.
3 Equal to 20 percent of adjusted EBFIT before bonus for that year (rounded to
nearest dollar) plus, for 1999, $40,197, as a payment of interest.
16 Petitioner’s adjusted EBFIT is the EBFIT reported on its
FOCUS report for that year, increased by any disallowed,
nondeductible compensation petitioner paid for that year to Mrs.
Wechsler or Gilbert.
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