Alpha Medical, Inc., f.k.a. Alpha Medical Management, Inc. - Page 20

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          income (before deduction of Rogers' compensation).5  Although it            
          is often helpful to consider compensation as a percentage of both           
          gross receipts and net income, the latter is in most cases more             
          probative, because it more accurately gauges whether a                      
          corporation is disguising the distribution of dividends as                  
          compensation.  Owensby & Kritikos, Inc. v. Commissioner, 819 F.2d           
          1315, 1325-1326 (5th Cir. 1987), affg. T.C. Memo. 1985-267.                 
          However, as noted previously, each case turns on its own facts              
          and circumstances, and no particular ratio between compensation             
          and gross or net taxable income is a prerequisite for a finding             
          of reasonableness.                                                          
               Petitioner cites several cases in which this Court found               
          that the compensation paid was reasonable notwithstanding the               
          fact that the compensation was a large portion of the taxpayer's            
          gross and net income.  See, e.g., Pulsar Components Intl., Inc.             
          v. Commissioner, T.C. Memo. 1996-129 (reasonable compensation was           
          27.3 percent of gross receipts of $10,693,635 and 82.4 percent of           
          $3,546,647 taxable net income (before deduction of the                      
          compensation at issue) in 1985); Mad Auto Wrecking, Inc. v.                 
          Commissioner, T.C. Memo. 1995-153 (reasonable compensation was              
          34, 28, and 38 percent of gross receipts of $2,554,942,                     


               5  In 1990, Rogers' compensation was $4,439,180;                       
          petitioner's net taxable income after deducting Rogers'                     
          compensation was $2,432,253.  Thus, petitioner's net taxable                
          income before deducting Rogers' compensation was $6,871,433.                




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