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amount of so-called hospital insurance taxes that they overpaid
pursuant to sections 3101(b) and 3111(b) on the portion of
petitioner John R. Menard’s compensation recharacterized in
Menard I as a disguised dividend.
Background
We adopt the findings of fact set forth in Menard I. For
convenience and clarity, we repeat below the facts necessary for
the disposition of this matter, and we supplement those findings
with additional facts as appropriate.
Menard, Inc. (Menards), was incorporated in Wisconsin in
1962 and is engaged primarily in the retail sale of hardware,
building supplies, paint, garden equipment, and similar items.
As of the trial date, Menards had approximately 160 stores in
nine Midwestern States and was one of the nation’s top retail
home improvement chains.
John R. Menard (Mr. Menard) served as president and chief
executive officer of Menards and has been a controlling
shareholder of Menards since its incorporation. During the
period in question, Mr. Menard owned approximately 89 percent of
Menards’s voting and nonvoting stock.
Menards is an accrual basis taxpayer and has a fiscal year
ending January 31 for tax and financial reporting purposes. On
October 15, 1998, Menards timely filed Form 1120, U.S.
Corporation Income Tax Return, for TYE 1998. On October 12,
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