GAC Produce Co., Inc., An Arizona Corporation - Page 50




                                        - 50 -                                         

         FYE             Amount                                                        
         6/30/89         $1,307,000                                                    
         6/30/90          3,538,000                                                    
         6/30/91          1,153,000                                                    
         6/30/92          1,032,000                                                    
         Total           7,030,000                                                     

              Dr. Frisch used a profit-split analysis and a comparison                 
         with industry averages to test the reasonableness of his                      
         conclusions.  He stated that the two reasonableness tests                     
         confirmed that applying the otros growers' commission rate, with              
         adjustments, to petitioner's related-party transactions would                 
         result in petitioner's earning appropriate levels of income                   
         during 1989 through 1992.  Further, he stated, those tests                    
         indicate that petitioner's income levels as reported on its tax               
         returns for the years in issue were not consistent with arm's-                
         length behavior.  Therefore, Dr. Frisch concluded that it was                 
         necessary to adjust petitioner's commissions in order to make                 
         them consistent with the arm's-length standard.                               
              Respondent also submitted the expert report of Enrique E.                
         Figueroa (Dr. Figueroa).  He has a Ph.D. in agricultural                      
         economics from the University of California-Davis and is employed             
         as a research associate for the Department of Agricultural,                   
         Resource and Managerial Economics at Cornell University.  Dr.                 
         Figueroa provided general background information on the produce               
         industry.                                                                     





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Last modified: May 25, 2011