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by the employee, the duties that the employee performed, and the
general importance of the employee to the success of the company.
American Foundry v. Commissioner, 536 F.2d 289, 291-292 (9th Cir.
1976), affg. in part and revg. in part 59 T.C. 231 (1972).
It is clear from the testimony in this case that both Mr.
and Mrs. Penalba worked long hours for petitioner. The evidence
indicates that Mr. Penalba frequently worked 15- to 18-hour days,
while Mrs. Penalba worked 60 to 80 hours per week. It is also
evident that petitioner would not have been in existence, or have
continued in existence, without the efforts of employees or
officers comparable to the Penalbas. The Penalbas were both
extremely dedicated to their work.
Respondent contends that the dramatic increase in gross
receipts was not solely caused by the efforts of the Penalbas,
but rather the fashion trends that had a great impact on
petitioner's business in 1990. Respondent argues that the
increase in sales was, for the most part, a fortuitous
circumstance.
We find that the dramatic increase in sales in 1990, while
partly due to fortuitous market circumstances, was due primarily
to the insight of Mr. Penalba in seeing the need for a
cotton/Lycra fabric and developing such a material. Mr. Penalba
saw the need in the manufacture of leggings and other garments of
an expandable fabric and developed such a fabric before
petitioner's competitors had such a fabric available. This to an
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