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nonshareholder-employee would have earned on this sale to be an
appropriate factor in measuring Mr. Haviv's compensation for
1991. However, petitioner did not establish the total amount of
sales for which Mr. Haviv was directly responsible. Since Mr.
Haviv was an employee of petitioner, it was improper to credit
him with all of the "house sales" as if they were his own. Thus,
we disagree with petitioner's assertion that an arm's-length
value for Mr. Haviv's selling position was 50 percent of profits
from all sales to "house customers". As petitioner admits, the
sale of the red diamond was an extraordinary transaction, as
there were only five in the world. Mr. Haviv took a specific
order for a red diamond and then was able to purchase one at the
Antwerp exchange. This diamond was then sold by one of
petitioner's salespersons and petitioner made $546,000 profit.
Unlike traditional "house sales", where customers purchase from
petitioner's salespersons after hearing of petitioner's
reputation, Mr. Haviv played an unusually active role in the sale
of the red diamond. In sales where Mr. Haviv lacked such
involvement, we find it was improper for petitioner to have
credited him with a "house sale". Therefore, since 1992 did not
contain such an extraordinary sale as the red diamond, Mr.
Haviv's total compensation for 1992 might have been significantly
less than what it was for 1991 if based upon commissions.
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