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by the shareholder's equity for each fiscal year. See Universal
Manufacturing Co. v. Commissioner, T.C. Memo. 1994-367 (citing
Elliotts, Inc. v. Commissioner, supra at 1245). Petitioner
reported the following:
Fiscal Taxable Income Shareholder's Return on
Year Before NOL’s Equity Investment
1989 $357,932 $1,341,966 26.67%
1990 435,637 1,518,957 28.68%
1991 924,834 2,006,195 46.10%
Petitioner's rate of return would satisfy a hypothetical
investor. See Elliotts, Inc. v. Commissioner, supra at 1247 (an
average return on equity of 20 percent would satisfy an
independent investor). This factor favors petitioner.
d. Comparison of Amounts Paid by Similar Businesses
for Similar Services
Evidence that similar companies pay comparable amounts for
similar work may indicate that compensation is reasonable.
Elliotts, Inc. v. Commissioner, supra at 1246; see Hoffman Radio
Corp. v. Commissioner, 177 F.2d 264, 266 (9th Cir. 1949); E.
Wagner & Son, Inc. v. Commissioner, supra at 819. Neither party
offered any evidence of the compensation that similar
corporations pay for services similar to those performed by Dacor
and Kadac. Because petitioner bears the burden of proof, Rule
142(a), this factor favors respondent.
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