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$2,200,000 and $500,000 in 1991 and 1992, respectively. We agree.
Comparison of Salaries Paid With Dividends to
Shareholders
The failure to pay more than minimal dividends may suggest
that reported compensation actually is (in whole or in part) a
dividend. Owensby & Kritikos, Inc. v. Commissioner, supra at
1323-1324; Charles Schneider & Co. v. Commissioner, 500 F.2d at
151-152. Corporations, however, are not required to pay
dividends. Indeed, shareholders may be equally content with the
appreciation of their stock caused, for example, by the retention
of earnings. Owensby & Kritikos, Inc. v. Commissioner, supra;
Home Interiors & Gifts, Inc. v. Commissioner, 73 T.C. at 1162.
Nevertheless, a corporation's failure to pay dividends may be a
factor in determining the reasonableness of officer compensation.
Since its incorporation in 1983, petitioner has never paid a
dividend to shareholders. The board of directors, which has the
authority to pay dividends and award bonuses, has always
consisted solely of Mr. and Mrs. Haviv, who are also the only
employees ever to receive yearend bonuses.
Prevailing Rates of Compensation for Comparable
Positions in Comparable Companies
Respondent's regulations provide that:
It is, in general, just to assume that reasonable and
true compensation is only such amount as would
ordinarily be paid for like services by like
enterprises under like circumstances. ***[Sec. 1.162-
7(b)(3), Income Tax Regs.]
Both parties testified to the difficulty of finding a business
comparable to petitioner. In determining that $207,852 and
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