Max Burton Enterprises, Inc. - Page 12

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          1241, 1245-1247 (9th Cir. 1983), revg. and remanding T.C. Memo.             
          1980-282, the Court of Appeals for the Ninth Circuit divided the            
          factors into five broad categories, to wit, the employee’s role             
          in the company; comparison of the employee’s salaries with those            
          paid by similar companies for similar services; the character and           
          condition of the company, including the complexities of the                 
          business and general economic conditions; factors indicating a              
          conflict of interest, such as the employee’s shareholder status;            
          and internal consistency in a company’s treatment of payments to            
          employees.  No single factor is determinative.  Pacific Grains,             
          Inc. v. Commissioner, 399 F.2d 603, 606 (9th Cir. 1968), affg.              
          T.C. Memo. 1967-7; Home Interiors & Gifts, Inc. v. Commissioner,            
          73 T.C. 1142, 1156 (1980).  When the case involves a closely held           
          corporation with the controlling shareholders setting their own             
          level of compensation as employees, the reasonableness of the               
          compensation is subject to close scrutiny.  Owensby & Kritikos,             
          Inc. v. Commissioner, supra; Elliotts, Inc. v. Commissioner,                
          supra at 1246.                                                              
               Respondent relies on Maggio Bros. Co. v. Commissioner, 6               
          T.C. 999, 1006 (1946), and contends that the bonuses in question            
          were not paid during petitioner’s 1990 tax year.  Respondent                
          argues that the payments by checks dated June 29, 1990, and                 
          immediate loans back to petitioner “lacked economic substance and           
          were entered into solely for tax-avoidance purposes.”  Respondent           

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