Labelgraphics, Inc. - Page 21

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               Although petitioner's expert Culbertson opined that the 1990           
          fiscal year compensation was justified because Mr. Martin had               
          been undercompensated in prior years, he offered no analysis or             
          explanation in support of his claim.  In light of his failure to            
          do so, we give his conclusion little weight.                                
               Except for perhaps 1980 and 1981 (covering petitioner's                
          first year and a half of operations), Mr. Martin appears to have            
          been very well compensated in prior years.  His 1984 total                  
          compensation of $352,200 was almost as much as his 1989 total               
          compensation of $358,200, despite petitioner's enjoying a                   
          substantially better financial performance for its 1989 fiscal              
          year than for its 1984 fiscal year.  Petitioner's 1989 fiscal               
          year gross receipts were more than twice its 1984 fiscal year               
          gross receipts.  Similarly, its 1989 fiscal year net profit after           
          taxes was over 1.4 times its 1984 fiscal year net profit after              
          taxes.  Thus, any possible earlier undercompensation by                     
          petitioner of Mr. Martin was likely remedied long before 1990.              
               Further, pertinent minutes of the June 27, 1990, board                 
          meeting authorizing petitioner's payment of the 1990 bonus in               
          issue make no mention that any part of this $722,913 was to                 
          compensate Mr. Martin for his services in prior years.                      
          Accordingly, we conclude that petitioner has failed to establish            
          that some of the 1990 fiscal year compensation in issue was to              
          remedy its alleged prior undercompensation of Mr. Martin.  See              

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