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Gifts, Inc. v. Commissioner, 73 T.C. 1142, 1158 (1980).
Petitioner maintains that Mr. Heitz is involved in every facet of
Exacto's business and that he discharged his responsibility
through long hours and significant effort. Respondent
acknowledges that Mr. Heitz is a valuable employee, but
respondent maintains that this fact was taken into account in his
determination of reasonable compensation.
Mr. Heitz was indispensable to Exacto's business. He worked
60 to 70 hours per week, performing several functions. Mr. Heitz
served as president and chief executive officer, and he
supervised sales, marketing, and research and development. In
addition, Mr. Heitz assisted in the development of an automated
line of spring-making machines and in inventing technical and
practical advances in spring packaging. Mr. Heitz was essential
to Exacto's success.
B. Scarcity of Qualified Employees
The second factor considered in determining whether
compensation is reasonable is the ability of the employer to find
a qualified replacement for the employee. Home Interiors &
Gifts, Inc. v. Commissioner, supra at 1158. Mr. Heitz is a
technical expert in the area of spring design. Spring design is
an extremely specialized branch of mechanical engineering, and
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