- 22 -
Pacific Grains, Inc. v. Commissioner, 399 F.2d at 606; see also
Estate of Wallace v. Commissioner, 95 T.C. at 553-554.
B. External Comparison
This second factor compares the employee's compensation with
that paid by similar companies for similar services. Elliotts,
Inc. v. Commissioner, 716 F.2d at 1246; see sec. 1.162-7(b)(3),
Income Tax Regs.
Based on their claimed knowledge of the compensation certain
high-technology companies furnished their executives,
petitioner's experts Culbertson and Jones were each of the
opinion that the $722,913 bonus petitioner paid to Mr. Martin was
reasonable. They noted that top executives at many high-
technology companies typically receive stock options as part of
their compensation package, and that these stock options can
produce substantial compensation in the event the company's stock
price rises greatly. However, as Jones noted, stock options
could not be used by petitioner to compensate Mr. Martin, because
Mr. Martin already owned a 100-percent stock interest in
petitioner.
Jones was also of the opinion that Mr. Martin was actually
entitled to even more compensation than he received, because,
according to her, he performed multiple executive roles,
including being petitioner's chief executive officer, vice
president of marketing, vice president of sales, and chief
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