Vitamin Village, Inc. - Page 2
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After concessions,2 the issues for decision are: (1)
Whether the amounts paid to petitioner’s sole executive and
shareholder during the fiscal years at issue constituted
reasonable compensation under section 162(a)(1); (2) whether
petitioner is entitled to deduct advertising expenses under
section 162(a) of $1,105,276 for FYE June 30, 1996; and (3)
whether petitioner is entitled to depreciate costs incurred in
constructing a houseboat, a floating garage, and a dock under
section 167(a)(1) during the fiscal years at issue.
FINDINGS OF FACT
The parties’ stipulation of facts and the attached exhibits
are incorporated herein by this reference, and the facts
stipulated are so found. At the time the petition was filed,
petitioner maintained its business office in Wilsonville, Oregon.
A. Petitioner’s Business History
Petitioner was incorporated by Daniel L. Reeves in the State
of Oregon in 1979.3 Petitioner, an accrual basis taxpayer with
the Internal Revenue Code, as amended, and Rule references are to
the Tax Court Rules of Practice and Procedure. Amounts are
rounded to the nearest dollar.
2 At trial, respondent conceded that petitioner was entitled
to deduct a net operating loss of $320,845 in FYE June 30, 1996,
carried back from its FYE June 30, 1998. On brief, petitioner
conceded it failed to report interest income of $11,516 in FYE
June 30, 1996.
3 Mr. Reeves originally founded petitioner with two other
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Last modified: November 10, 2007