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Respondent contends that petitioner may deduct only $57,159,
$149,175, and $155,559 for those years. Respondent determined
these amounts based on the amount Dacor's and Kadac's employees
reported on their Oregon income tax returns, increased by 30
percent for taxes and benefits.
2. Whether the Amount of Management Fees That Petitioner
Paid Was Reasonable
The parties agree that we should apply the legal standards
which govern whether compensation is reasonable to decide whether
the management fees at issue here were reasonable. More
specifically, the parties agree that we should apply the factors
in Elliotts, Inc. v. Commissioner, 716 F.2d 1241 (9th Cir. 1983),
revg. and remanding T.C. Memo. 1980-282. The factors are: The
importance of the employees who perform services to the success
of the business; the character and condition of the company; the
hypothetical investor's viewpoint; the consistency of payments
for similar services within petitioner’s business; and a
comparison of amounts paid by other similar businesses for
similar services. We also consider petitioner's contention that
comparing the management fees to petitioner's gross receipts
shows that the management fees were reasonable.
No single factor determines whether the fees at issue were
reasonable. Pacific Grains, Inc. v. Commissioner, 399 F.2d 603,
606 (9th Cir. 1968), affg. T.C. Memo. 1967-7; Mayson
Manufacturing Co. v. Commissioner, 178 F.2d 115, 119 (6th Cir.
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