The Escrow Connection, Inc., A.K.A. The Escrow Connection - Page 26

                                       - 26 -                                         

          its employees, both shareholders and nonshareholders, it may be             
          able to justify a higher compensation level to its shareholder-             
          employees.  Owensby & Kritikos, Inc. v. Commissioner, 819 F.2d              
          at 1324.  In addition, a longstanding, consistently applied                 
          compensation plan indicates that compensation is reasonable.                
          Elliotts, Inc. v. Commissioner, supra at 1247.                              
               Petitioner paid bonuses to all employees, but petitioner               
          did not pay bonuses to its nonshareholder escrow officers in a              
          manner consistent with which it paid Kleindienst.  Petitioner               
          paid its escrow officers a closing commission of 10 percent of              
          fees from escrows that they closed.  Expert witnesses from both             
          parties stated that escrow officers commonly make about one-                
          third of the closing fees as commission.  Petitioner never                  
          explained why its compensation plan for its escrow officers                 
          differed from the industry norm.  These officers also solicited             
          escrows without additional commission.  In total, petitioner's              
          other escrow officers received salary, commission, and bonuses              
          of $218,763 and $248,091, while Kleindienst made $584,710 and               
          $564,800 during the years in issue, respectively.  In addition,             
          Kleindienst's compensation exceeded the combined compensation of            
          all of petitioner's other 21 employees by $127,419 in taxable               
          year 1989 and its other 23 employees by $79,494 in taxable year             
          1990.  The disparity between Kleindienst's compensation and that            
          of the nonshareholder escrow officers is patently glaring                   





Page:  Previous  15  16  17  18  19  20  21  22  23  24  25  26  27  28  29  30  31  32  33  34  Next

Last modified: May 25, 2011