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petitioner's rate of return, standing alone, would have satisfied
a hypothetical independent investor. Cf. Rapco, Inc. v.
Commissioner, 85 F.3d 950, 955 (2d Cir. 1996), affg. T.C. Memo.
1995-128.
Petitioner now seeks to compare the rate of return in this
case to that in other cases in which the reasonableness of
compensation paid to shareholder-officers of closely held
companies was determined. Each case, however, must be decided on
the evidence in that case and on the specific characteristics of
the company and the employee involved. Cases relied on by
petitioner, such as Donald Palmer Co. v. Commissioner, T.C. Memo.
1995-65, affd. without published opinion 84 F.3d 431 (5th Cir.
1996), involved companies that are totally different in
operation, in sharing of managerial responsibility, and in risks
associated with the business of the company. The deficiencies in
the expert evidence in this case cannot be overcome by surveys of
results in different cases decided on different evidence.
Petitioner's proposed method of surveying cases suggests that we
decide the issue as "what the traffic will bear", excluding
consideration of all nonlitigated compensation arrangements and
other relevant market data.
Petitioner also argues that the testimony of actual
shareholders, who were pleased with the return on their minimal
investments and small percentage holdings in petitioner, supports
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