Sunbelt Clothing Company, Inc., f.k.a. Unprinted T-Shirt Warehouse, Inc. - Page 29

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          9.  Employer's Salary Policy As to All Employees                            

               Courts have considered salaries paid to other employees of a           
          business in deciding whether compensation is reasonable.                    
          Home Interiors & Gifts, Inc. v. Commissioner, 73 T.C. at 1159.  We          
          look to this factor to determine whether Messrs. Bennett and Sokol          
          were compensated differently than petitioner's other employees              
          solely because of their status as shareholders.                             
               Petitioner deducted total salaries of $4,498,328, $5,203,045,          
          and $5,197,408 in fiscal years 1990, 1991, and 1992, respectively.          
          As a percentage of total salaries paid, Messrs. Bennett and Sokol           
          received 60.02 percent in 1990, 51.89 percent in 1991, and 39.45            
          percent in 1992, even though they constituted less than 1 percent           
          of petitioner's employees.  Respondent contends that these figures          
          constituted a significant proportion of petitioner's total salary           
          costs.                                                                      
               These percentages do not necessarily indicate that the level           
          of compensation paid to Messrs. Bennett and Sokol was a function of         
          ownership rather than management responsibility.  A reasonable,             
          longstanding, and consistently applied compensation plan,                   
          negotiated at arm's length, for example, is evidence that                   
          compensation is reasonable.  Owensby & Kritikos, Inc. v.                    
          Commissioner, 819 F.2d at 1327.                                             







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