Wy'East Color, Inc. An Oregon Corporation - Page 22

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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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