-19-
Petitioner contends that it grew even though other
independent claims adjusting companies failed. Nonetheless,
petitioner benefited tremendously from the large amount of
catastrophes (5 of the 10 largest in history) during its fiscal
years 1992 and 1993. This factor favors respondent.
5. Petitioner's Financial Condition
The past and present financial condition of a company is
relevant to deciding whether compensation was reasonable. Home
Interiors & Gifts, Inc. v. Commissioner, supra at 1157-1158.
Petitioner contends that the fact that its gross receipts
increased from $282,682 in fiscal year 1988 to $20,438,803 in
fiscal year 1992 and $9,168,585 in fiscal year 1993 shows that
its financial condition was good. We disagree.
Petitioner's financial condition (in contrast to Eberl's)
was poor. Despite having a large increase in gross receipts from
fiscal year 1988 to fiscal years 1992 and 1993, petitioner had a
tiny amount of profits in fiscal years 1992 and 1993, negative
taxable income from fiscal years 1988 to 1992, and taxable income
of only $27,393 in fiscal year 1993. Petitioner's profits in
fiscal years 1992 and 1993 were substantially lower than those of
comparably sized service companies.
In Alpha Med., Inc. v. Commissioner, 172 F.3d 942 (6th Cir.
1999), revg. T.C. Memo. 1997-464, the taxpayer was a medical
management corporation that paid its president and sole
shareholder compensation of $4,439,180. The U.S. Court of
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