Herold Marketing Associates, Inc. - Page 25




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          Nothing in the record gives us comfort that treating blank                   
          responses as negative responses is a reasonable approach under               
          the circumstances.  Once again, "'We are not satisfied that a                
          reasonable level of compensation for an executive like * * *                 
          [Herold] can be accurately determined by reference to the                    
          industries * * * [Mr. Carey] surveyed because of the absence of              
          significant information on other businesses similar to                       
          petitioner's.'"  Pulsar Components Intl., Inc. v. Commissioner,              
          T.C. Memo. 1996-129 (quoting Thomas A. Curtis, M.D., Inc. v.                 
          Commissioner, T.C. Memo. 1994-15); see also Mad Auto Wrecking,               
          Inc. v. Commissioner, T.C. Memo. 1995-153.  Indeed, comparing                
          compensation paid to officers of companies that differ markedly              
          provides guidance of dubious value.  See Diverse Indus., Inc. v.             
          Commissioner, T.C. Memo. 1986-84; Niagara Falls Coach Lines, Inc.            
          v. Commissioner, T.C. Memo. 1977-269.                                        
          8.  Employer's Salary Policy As to All Employees                             
               Courts have considered salaries paid to other employees of a            
          business in deciding whether compensation is reasonable.                     
          Home Interiors & Gifts, Inc. v. Commissioner, 73 T.C. at 1159.               
          We look to this factor to determine whether Herold was                       
          compensated differently than petitioner's other employees merely             
          because of Herold's status as a shareholder.  Owensby & Kritikos,            
          Inc. v. Commissioner, 819 F.2d at 1322-1323.  A reasonable,                  
          longstanding, and consistently applied compensation plan is                  
          evidence that compensation is reasonable.                                    



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