- -20
W was compensated $751,000 for 1991 compared to Mr. Haviv's
$601,077 and $1,016,000 for 1992 compared to Mr. Haviv's
$603,269. Like Mr. Haviv, Mr. W was also the primary shareholder
of his company. But, unlike Mr. Haviv, he operated the company
as an S corporation. B Co.'s sales were slightly lower for 1991
and 1992, but its gross profit percentage was approximately
double that of petitioner.
While Mr. W's compensation statistics indicate that
respondent's compensation allocations may be less than the value
of Mr. Haviv's services, we decline to accept the compensation of
one employee from one company in the industry as a benchmark for
reasonableness.
Petitioner presented two certified public accountants as
witnesses who each testified that Mr. Haviv's compensation was
reasonable for the services rendered. Mr. Randy Galanti
concluded that Mr. Haviv's "compensation was in the range of
reasonable based upon the compensation that could have been
reasonably paid for just the first four functions [performed by
Mr. Haviv]:"
1991 1992
Purchasing function $106,598 $151,270
Sales function 451,027 393,791
Chief executive officer 413,553 446,367
Chief financial officer 406,454 433,337
Reasonable Compensation
for above functions $1,377,632 $1,424,765
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