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attributes. When petitioner is successful, he is the primary
reason for its success. While this factor favors petitioner, we
note that there are limits to reasonable compensation "even for
the most valuable employees." Owensby & Kritikos, Inc. v.
Commissioner, 819 F.2d 1315, 1325 (5th Cir. 1987), affg. T.C.
Memo. 1985-267.
Nature, Extent, and Scope of the Employee's Work
An employee's position, hours worked, duties performed, and
general importance to the success of a business may justify high
compensation. Home Interiors & Gifts, Inc. v. Commissioner,
supra at 1158.
Mr. Haviv essentially runs the entire business. Among other
roles, Mr. Haviv is petitioner's president, sole purchaser, and
supervisor of most sales. When Mr. Haviv is able to utilize all
of his skills to purchase jewels at low prices, petitioner can
generate profits. This factor favors petitioner.
Size and Complexities of the Business
Courts have considered the size and complexity of a
taxpayer's business in deciding whether compensation is
reasonable. Pepsi-Cola Bottling Co. v. Commissioner, supra at
179. In evaluating the size of petitioner we examine its sales
and net income. See E. Wagner & Son v. Commissioner, 93 F.2d
816, 819 (9th Cir. 1937). In considering the complexities of
petitioner's business we note that petitioner does not own its
own building, has only 13 employees, has retained earnings of
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