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salary was 88.45 percent of taxable net income (before deducting
his compensation) in 1992 and 90.27 percent in 1993.
5. General Economic Conditions
This factor helps to determine whether the success of a
business is attributable to general economic conditions, as
opposed to the efforts and business acumen of the employee.
General economic conditions may affect a business' performance
and indicate the extent (if any) of the employee's effect on the
company. Adverse economic conditions, for example, may tend to
show that an employee's skill was important to a company that
grew during the bad years. Mad Auto Wrecking, Inc. v.
Commissioner, supra.
Petitioner has faced economic ruin and been forced to
reinvent itself on at least three separate occasions. Its sales
went from $1 million in its first year to $70 million in 1984.
Sales fell to less than $1 million in 1985 and were back up to
nearly $44 million by 1993.
In 1984, petitioner lost its sales representation contract
with Apple. This accounts for the precipitous sales decline in
1985. While petitioner represented Apple, it had developed
Apple's four largest accounts nationwide. Herold devised a
strategy of targeting these four largest accounts and selling
other electronics products to them. He succeeded with three of
these jumbo accounts. Just as that strategy was beginning to
take hold, all three of these accounts ran into adverse economic
conditions and became insolvent. Again, petitioner saw its
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