William J. and Sandra D. Heitz - Page 12

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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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