-32-
earnings Carey said it would have been reasonable for petitioner
to have ($2 million). Applying Carey's analysis to fiscal year
1993, reasonable compensation to Eberl could be as much as
$1,080,000 (the difference between the amount petitioner paid
Eberl ($2,080,000) and the amount of retained earnings Carey said
would have been reasonable for petitioner to have ($1 million)).
Other facts present here support a finding that compensation
to Eberl in excess of those amounts would be unreasonable. Eberl
set his own compensation, which was not the result of an arm's-
length agreement; petitioner retained a minimal amount of
earnings and distributed almost all of its profits to Eberl at
the end of the year; and petitioner's other employees and
independent adjusters did not receive yearend bonuses. These
facts suggest that a substantial part of Eberl's compensation was
a disguised dividend and not purely for services. We conclude
that $2,340,000 for fiscal year 1992 and $1,080,000 for fiscal
year 1993 constituted reasonable compensation to Eberl for those
years. See Pepsi-Cola Bottling Co. v. Commissioner, 61 T.C. at
568 (the Court must decide the amount of reasonable compensation
where the taxpayer proves the Commissioner's determination to be
wrong).
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