Menard, Inc. v. Commissioner of Internal Revenue
United States Court of Appeals for the Seventh Circuit
560 F.3d 620 (2009)
- Written by Kelly Simon, JD
Facts
In 1998, John Menard, the founder, CEO and majority shareholder of Menard, Inc. (Menards) (plaintiff), received a salary of approximately $157,000, a profit-sharing bonus of over $3 million, and an additional 5 percent bonus of over $17.5 million. Classifying John’s entire compensation amount as salary, the company deducted the full amount from the company’s taxable income on its tax return. The Commissioner of Internal Revenue (commissioner) (defendant) determined that John’s salary was excessive and that the profit-sharing bonus had been intended as a dividend, which was not deductible from the company’s taxable income. Menards appealed the commissioner’s decision to the United States Tax Court. The Tax Court affirmed the commissioner’s decision, and Menards appealed.
Rule of Law
Issue
Holding and Reasoning (Posner, J.)
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