H & A International Jewelry, Ltd. - Page 19
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US Tax Court > 1997 > H & A International Jewelry, Ltd. - Page 19
business such as jewelry sold at retail, yet that is the only RMA
survey respondent elected to use. Despite the inherent flaws in
the RMA survey, respondent relied solely upon the RMA statistics
without presenting any witnesses, expert or otherwise, to bolster
respondent's figures. Respondent has offered no evidence to show
that the 10 companies used in the survey to determine a
"reasonable" compensation for Mr. Haviv are even comparable to
petitioner. Thus, we find respondent's figures to be arbitrary.
We also find petitioner's figures lack credibility.
Admitting that a true competitor does not exist, petitioner
compares itself to Mr. W's company (which we will refer to as
simply B Co. despite the fact that it was actually two companies,
B Co. and C Co., before 1991) by virtue of the fact that they are
both involved in selling wholesale and retail jewelry and
precious stones, appraisal and insurance of precious stones, as
well as custom design and jewelry repairs. However, the
percentage of business allocated to each aspect of its operations
varied greatly between companies. For example, wholesale trade
accounted for over 50 percent of petitioner's business, but for
only 10 percent of B Co.'s total profits.
However there are many similarities that weigh in
petitioner's favor. B Co.'s net sales figure for 1991 was
$5,523,835 compared to petitioner's $6,495,378, and for 1992 was
$6,792,055 compared to petitioner's $7,009,772. B Co.'s net
income was $22,211 for 1991 and negative $220,395 for 1992. Mr.
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