- 16 -16
have been on the duties that Ferguson actually performed, and
some weight should have been given to Ferguson's sales ability
and his skill in motivating petitioner's super salesmen.
3. Character and Condition of Company
This category of factors requires us to focus on
petitioner's size as indicated by its sales, or capital value,
the complexities of the business, and the general economic
conditions. Elliotts, Inc. v. Commissioner, 716 F.2d at 1246;
Pepsi-Cola Bottling Co. v. Commissioner, 528 F.2d 176, 179 (10th
Cir. 1975), affg. 61 T.C. 564 (1974).
Petitioner performed well in a competitive business.
Respondent's expert indicated that petitioner had done well in
terms of growth and profitability during the years in issue.
Indeed, Fuller indicated that petitioner's growth and
profitability numbers were better than the numbers produced by
the companies that Fuller considered comparable to petitioner.
Courts also compare the compensation paid with the gross
profit and net income of the corporation. Pepsi-Cola Bottling
Co. v. Commissioner, supra at 179. Ferguson's compensation as a
percentage of gross profit (before deducting his compensation) is
approximately 10 percent, 13 percent, and 15 percent for the
fiscal years ending 1990, 1991, and 1992, respectively.
Ferguson's compensation as a percentage of net income (before
deducting his compensation) is approximately 29 percent, 36
percent, and 35 percent for the fiscal years ending 1990, 1991,
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011