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fruition. Ginger reviewed all of petitioner's expenditures,
ensured low overhead, resisted adding new employees, and insisted
that petitioner grow through retained earnings. Ginger
continually marketed petitioner's services. Ginger's sales and
marketing abilities were described as "amazing" and
"outstanding". Petitioner grew steadily from its inception in
1984, weathered the economic downturn in 1991, and began a
recovery in 1992. Ginger served as the catalyst for petitioner's
growth and success.
2. External Comparison
We also compare the employee's salary with the salaries paid
by similar companies for similar services. Sec.1.162-7(b)(3),
Income Tax Regs. Both parties offered expert testimony as to
what a like company would pay for like services. Both experts
considered surveys of financial data on numerous organizations,
including developers, builders, residential building contractors,
and construction contractors in specialty trades.
a. Respondent's Expert
Respondent presented expert testimony from Scott D. Hakala
(Hakala). Hakala reviewed the surveys of financial data and
concluded that it was not very "satisfying". As a result, he
relied less on the market data than he would prefer for the final
conclusion. Instead, Hakala derived a formula to calculate
Ginger's compensation; the formula does incorporate one aspect of
the survey data.
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