- -18
$224,313 constituted reasonable compensation for 1991 and 1992,
respectively, respondent relied solely upon statistics from the
RMA survey.8 Respondent accepts the 10 jewelers used in the
survey as petitioner's competitors. However, in an introduction
to its studies, RMA cautions that its data should be used "only
as general guidelines and not as absolute industry norms." The
RMA guidelines explain that companies used are not selected "by
any random or statistically reliable method" and that a
relatively small industry sample (such as the 10 companies used
for wholesale jewelers) may increase the chances that such data
do not fully represent an industry.
We have other reservations about the manner in which
respondent applied the survey statistics.9 Respondent used the
3.2-percent figure (derived from the 1991 survey) for 1992 also,
despite the fact that the 1992 RMA survey did not release such
figures for 1992, while the 1993 survey provided a much higher
corresponding percentage of 6.0. In addition, the RMA wholesale
jewelry survey does not account for all aspects of petitioner's
8 According to the RMA survey, respondent's
determinations would place petitioner just below the upper
quartile of wholesale jewelry companies as distinguished by
levels of officer compensation. While data from RMA surveys have
been accepted by this Court in some instances, on other occasions
its reliability in determining reasonable compensation has been
questioned. See PMT, Inc. v. Commissioner, T.C. Memo. 1996-303;
Lumber City Corp. v. Commissioner, T.C. Memo. 1996-171; Hendricks
Furniture, Inc. v. Commissioner, T.C. Memo. 1988-133.
9 Respondent's capping reasonable compensation at 3.2
percent of petitioner's net sales ignores RMA figures from 1992
and 1993.
Page: Previous 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 NextLast modified: May 25, 2011