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in petitioner's growth and lessened the credit due to
Kleindienst for petitioner's success. Although the economy
positively influenced petitioner's success, the record does not
permit us to quantify the extent it affected petitioner's
success.
D. Conflict of Interest
The fourth category identified by the Court of Appeals for
the Ninth Circuit concerns the relationship between the company
and the shareholder-employee possibly permitting nondeductible
corporate distributions of profits to be paid as deductible
compensation. Elliotts, Inc. v. Commissioner, supra at 1246. A
potential for such abuse exists when the employee whose
compensation is in issue is the company's sole or controlling
shareholder. Charles Schneider & Co. v. Commissioner, 500 F.2d
at 152; sec. 1.162-7(b)(1), Income Tax Regs. Respondent
correctly contends that Kleindienst controlled the amount of her
own compensation as she was the sole shareholder and sole
corporate officer. In such a situation, we must carefully
scrutinize the reasonableness of the compensation. Owensby &
Kritikos, Inc. v. Commissioner, 819 F.2d at 1324; Charles
Schneider & Co. v. Commissioner, supra at 152. Other factors
that point to a conflict of interest include compensation that
equals a disproportionately large percentage of gross income or
pretax net income, large bonuses to shareholder-employees but
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