Herold Marketing Associates, Inc. - Page 17
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We carefully scrutinize the facts at hand because
petitioner, the paying corporation, is controlled by Herold, the
employee to whom the compensation was paid. We must be sure that
any amount purportedly paid as compensation was actually paid for
services rendered by Herold, rather than a distribution to him of
earnings that petitioner could not otherwise deduct. RTS Inv.
Corp. v. Commissioner, supra at 650; Paul E. Kummer Realty Co. v.
Commissioner, 511 F.2d 313, 315-316 (8th Cir. 1975), affg.
T.C. Memo. 1974-44; Charles Schneider & Co. v. Commissioner,
supra at 152-153. We turn to the applicable factors.
1. Employee's Qualifications
An employee's superior qualifications justify high
compensation. See, e.g., Home Interiors & Gifts, Inc. v.
Commissioner, supra at 1158; Dave Fischbein Manufacturing Co. v.
Commissioner, 59 T.C. 338, 352-353 (1972).
Herold is exceptionally qualified for petitioner's business
by virtue of his education, training, experience, and dedication.
He understands and controls every aspect of its operations. He
is highly motivated and extremely productive. He is the primary
reason for petitioner's success.
The ability to conceptualize a vision and to lead an
organization to fulfill that vision is the essence of effective
business leadership. As the record amply demonstrates, Herold's
vision and insight into his industry have enabled him to invent
and reinvent petitioner's business in response to a series of
crises that might have led others to capitulate. In each
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