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Appeals concerns the character and condition of the company. The
relevant factors include the company's size as shown by its
sales, net income or capital value, and the complexities of the
business and general economic conditions. Elliotts, Inc. v.
Commissioner, supra at 1246.
Petitioner has demonstrated that prior to and during the
years at issue it was engaged in a very competitive and complex
business. Prior to Mr. Ruf's arrival, petitioner was on the
verge of bankruptcy and was facing increased competition from the
entry of large discount home centers into its market. Although
petitioner was on the verge of bankruptcy prior to Mr. Ruf's
becoming its CEO and, according to its financial statement, had
net income after taxes (but before utilization of net operating
loss carryforwards/carrybacks) for its fiscal year ended February
28, 1986, of negative $3,599,000, its financial statements show
that it had a net profit after taxes (but before utilization of
net operating loss carryforwards/carrybacks) for its fiscal years
ended February 28, 1987, February 29, 1988, February 28, 1989,
February 28, 1990, and February 28, 1991, of $823,000, $413,000,
$390,000, $325,000, and $275,000, respectively. Under Mr. Ruf's
direction, petitioner made a significant turnaround and returned
to profitability.
Although petitioner's financial statements show that it had
a positive net profit after taxes (but before utilization of net
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