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20.34, 23.44, and 21.36, respectively. In the case of Louise,
the first comparison yields percentages of 8.26, 7.55, and 7.26,
respectively, and the second comparison yields percentages of
20.34, 23.43, and 21.44, respectively.
We believe all four sets of percentages are rather high
seeing that petitioner employed approximately 150 individuals and
given our findings as to the qualifications of Emile and Louise
and the nature, extent, and scope of their work. We also bear in
mind our finding that petitioner did not ascertain Emile’s and
Louise’s bonuses on the basis of their contribution to it, but
rather on the size of its profits for the related years. We note
further that the percentages for both sets of comparisons are
relatively the same for Emile and Louise.
We are not unmindful that petitioner reported large amounts
of taxable income for each subject year, notwithstanding its
payment of large amounts of compensation to Emile and Louise.
The mere fact that a corporation has substantial taxable income
in a given year, however, does not necessarily mean that a
hypothetical independent investor would approve of what an
employee received as compensation. Such is especially true as to
Emile and Louise who, as mentioned above, were not indispensable
to the business and whose efforts during the subject years did
not result significantly in the generation of that income. As to
both Emile and Louise, we answer the question in the negative.
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