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instant record, neither party has persuaded us that, assuming
arguendo that Mr. Ruf were an independent investor, petitioner's
shareholder's equity accurately reflected his investment in
petitioner during the relevant years.
Moreover, even if the shareholder's equity accurately
reflected Mr. Ruf's investment in petitioner for the relevant
years, assuming arguendo that he were an independent investor
during those years, the record does not contain any credible
evidence of what an independent investor would have required as a
reasonable return on equity for investing in petitioner. This is
especially true given the fact that petitioner was on the verge
of bankruptcy at the time Mr. Ruf became petitioner's CEO.25
Although under the facts and circumstances presented here we
do not find petitioner's return on equity to be a reliable
indicator of the reasonableness of Mr. Ruf's compensation for the
years at issue, we find it significant that the compensation paid
by petitioner to Mr. Ruf was approved by Mr. Neiman. From the
time Stanislaus purchased petitioner in December 1986 and
throughout the years at issue, Mr. Neiman retained an interest in
petitioner both as a founder of a corporation who wished to see
that corporation succeed and as a creditor who held notes for
which petitioner was liable. In addition, from the time Stanis-
25 We did not find the opinions expressed by either of petition-
er's experts (viz., Dr. Barren and Dr. Vinso) on this issue to be
helpful to the Court.
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