- 19 -
L & B Pipe & Supply Co. v. Commissioner, T.C. Memo. 1994-187;
Automotive Inv. Dev., Inc. v. Commissioner, T.C. Memo. 1993-298;
Paramount Clothing Co. v. Commissioner, T.C. Memo. 1979-64.
5. General Economic Conditions
This factor helps to determine whether the success of a
business is attributable to general economic conditions, as
opposed to the efforts and business acumen of the employees.
General economic conditions may affect a business' performance
and indicate the extent, if any, of the employees' effect on the
company. Adverse economic conditions, for example, tend to show
that an employee's skill was important to a company that grew
during hard times.
Respondent contends that the dramatic increase in gross
sales was not caused solely by the efforts of Messrs. Bennett and
Sokol, but rather, that the general economic conditions of the
times had a great impact on petitioner's business just prior to
and during the years in issue. Respondent argues that the
increase in sales was, for the most part, a fortuitous
circumstance.
Petitioner's gross sales rose from $54,455,167 in fiscal
year 1990 to $69,748,749 in fiscal year 1991 to $70,059,961 in
fiscal year 1992, an overall increase of 29 percent. If the
economic conditions were indeed favorable during this period, we
Page: Previous 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 NextLast modified: May 25, 2011