Labelgraphics, Inc. - Page 17

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          relevant in determining the reasonableness of compensation.                 
          Mayson Manufacturing Co. v. Commissioner, 178 F.2d 115, 119 (6th            
          Cir. 1949), revg. and remanding a Memorandum Opinion of this                
          Court.  No single factor is dispositive.  Pacific Grains, Inc. v.           
          Commissioner, 399 F.2d at 606; Home Interiors & Gifts, Inc. v.              
          Commissioner, 73 T.C. 1142, 1156 (1980).  In Elliotts, Inc. v.              
          Commissioner, supra at 1245-1248, the Court of Appeals for the              
          Ninth Circuit, to which this case is appealable, used a five-               
          factor test:  (1) The employee's role in the company; (2) a                 
          comparison of the compensation paid to the employee with the                
          compensation paid to similarly situated employees in similar                
          companies; (3) the character and condition of the company; (4)              
          whether a conflict of interest exists that might permit the                 
          company to disguise dividend payments as deductible compensation;           
          and (5) whether the compensation was paid pursuant to a                     
          structured, formal, and consistently applied program.                       
               The parties recognize the applicability of the Elliotts,               
          Inc. test.  However, they disagree concerning the amount of                 
          purported compensation to Mr. Martin that qualifies as reasonable           
          compensation under that test.                                               
               Petitioner contends that the entire $878,913 Mr. Martin                
          received is reasonable compensation.  Although it acknowledges              
          that Mr. Martin was given an "unusually high" bonus of $722,913,            
          petitioner maintains this bonus represented reasonable                      
          compensation for his unique services.                                       

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