This is an appeal from the determination of a deficiency in income and profits taxes in the amount of $9,999,96 for the fiscal year ended November 30, 1918. The petition alleges error on the part of the Commissioner in disallowing amounts claimed as additional officers5 salaries. From the pleadings and the oral evidence offered at the hearing the Board makes the following
FINDINGS OF FACT.
1. The taxpayer is an Oregon corporation with its principal office at Portland. Since its organization in 1907 it has always been a close corporation, and during the year here involved O. B. Ballou, *494president, and O. F. Wright, vice president and secretary, owned between 9T and 98 per cent of the capital stock. Prior to incorporation these two men had operated the business for some years as a partnership.
2. Minutes of the board of directors of the corporation dated October 28, 1917, authorize a salary of $4,800 per annum plus a bonus of 7% per cent each for the president and the vice president. This salary and a bonus of $360, a total of $5,160 was drawn by each during the year ended November 30, 1918.
3. During the latter part of the year 1917 and during 1918 the stockholders several times discussed the question of the salaries of the president and the vice president and agreed among themselves that these two officers deserved a salary of $10,000 each. Due, however, to a conservative policy of operation and the desire of the principal officers to acquire funds for the erection of a new building, the additional salaries agreed upon were not drawn nor were they entered on the books of the corporation during the fiscal year.
4. Sometime during the early part of 1919 the corporation was advised by its accountants that the additional salaries might properly be entered on its books without actual payment being made. Entries dated November 30, 1918, were thereupon made on the corporation books showing an additional salary of $5,200 and a salary bonus of $390 to the credit of Ballou and of Wright.
5. On July 7, 1919, a resolution was adopted by the directors purporting to ratify the agreement previously arrived at as to the increased salaries to be allowed the president and vice president.
6. The additional salaries and salary bonuses entered on the books as of November 30, 1918, were paid in subsequent years.
DECISION.
The determination of the Commissioner is approved.
Arundell not participating.