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On balance, this factor tends slightly to show that the
compensation at issue was reasonable.
c. Size and Complexity of Taxpayer
The size and complexity of a taxpayer's business can
indicate whether compensation is reasonable. Elliotts, Inc. v.
Commissioner, 716 F.2d at 1246; Pepsi-Cola Bottling Co. v.
Commissioner, 528 F.2d 176, 179 (10th Cir. 1975), affg. 61 T.C.
564 (1974); Mayson Manufacturing Co. v. Commissioner, supra.
Petitioner's witnesses testified that petitioner's business was
straightforward and routine. However, petitioner had sales in
the year in issue of more than $8.6 million. It had assets of
$3.8 million at the start of the year in issue and $4.2 million
at the end. Petitioner served a large part of Southern
California, including the counties of San Diego, Orange, Los
Angeles, and Riverside.
Considering both the testimony and the other evidence of
petitioner's business, we conclude that this factor tends to show
that the compensation at issue was reasonable.
d. Comparison of Salaries Paid With Sales, Net
Income, Gross Income, and Capital Value
Courts have compared compensation to sales and gross and net
income in deciding whether compensation is reasonable. Elliotts,
Inc. v. Commissioner, supra at 1246; Mayson Manufacturing Co. v.
Commissioner, supra.
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