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P was president and majority stockholder of VanMark Corporation. In 1969, the corporation adopted a bylaw that required corporate officers who received income determined by the IRS as excessive and thus not deductible by the corporation as a business expense, to pay back the amount determined to be excessive. P also entered into a separate agreement requiring him to reimburse the corporation for nondeductible compensation. In 1974, P got $322,000 in salary and bonuses. The IRS determined that $57,500 was excessive and could not be deducted by the corporation. P then repaid the $57,500 in 1975. On his 1975, return P calculated his tax liability under 1341. The IRS allowed the deduction for 1975 but did not allow use of 1341. This resulted in a deficiency of $5,987.34. After paying, P sued for a refund of this deficiency.

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