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First, there was little doubt that Mr. Leonard was essential
to petitioner's success from its inception and indispensable to
petitioner's business. Moreover, he personally guaranteed
petitioner’s $1.5 million debt to the Royal Bank of Canada, which
was crucial to the All American Pipeline project. See Owensby &
Kritikos, Inc. v. Commissioner, 819 F.2d 1315, 1325 n.33 (5th Cir.
1987), affg. T.C. Memo. 1985-267. Although during 1987 Mr. Leonard
was in the process of retiring and petitioner's only activity was
to report previously earned income, these facts were
inconsequential in light of Mr. Leonard's experience and past
services.
Second, both parties relied upon expert testimony and written
opinions for purposes of determining external comparison. The
range of figures offered by these experts was unreasonably
disparate. Respondent's expert, Emmett James Brennan III,
determined the highest average amount of total compensation for Mr.
Leonard for 1987 to be $160,710. He also determined that in the
event we concluded that Mr. Leonard was entitled to a retirement
benefit, an additional $167,450 should be allocated for that
benefit. One of petitioner's experts, Michael Wagner, offered a
$180,000 to $200,000 range for Mr. Leonard's 1987 base salary and
a $1.2 million to $2 million range for Mr. Leonard's 1987 bonus.
Petitioner's other expert, Michael Kesner, concluded that the total
amount of compensation petitioner paid Mr. Leonard in 1987 was
reasonable because, according to Mr. Kesner, among other reasons,
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