35
indicates that he actually did so in 1986-87. The record does
not indicate that Mr. Munro devoted any more than minimal time to
petitioners' affairs during the years in question. Moreover, the
record indicates a sharp rise in Mr. Munro's compensation for
1987 without any concomitant growth of the associated
enterprises.
This factor supports allowing a deduction for payments to
Mr. Munro of no more than the normal pay of a chief executive
officer in the industry.
(b) External Comparison
This factor requires a comparison of the employee's
compensation with that paid by similar companies for similar
services. Elliotts, Inc. v. Commissioner, supra at 1246. Courts
often regard this as the most important factor and receive
testimony on the subject from competing experts. In these cases,
however, we have only the testimony of respondent's expert, E.
James Brennan III (Mr. Brennan). As we have previously noted,
Mr. Brennan is no stranger to this Court in that capacity. Mad
Auto Wrecking, Inc. v. Commissioner, T.C. Memo. 1995-153. The
method that Mr. Brennan has used to try to determine reasonable
compensation for Mr. Munro is similar to Mr. Brennan's method in
other recent cases. Mr. Brennan uses data published in executive
compensation surveys to derive equations relating total revenues
of a business to the compensation paid to its officers.
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