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remanding on other grounds T.C. Memo. 1980-282; see also Owensby
& Kritikos, Inc. v. Commissioner, 819 F.2d at 1327.
This factor favors respondent.
3. Internal Consistency in Compensation: Consistency of
the Compensation System Throughout the Company
Inconsistency of the compensation system throughout the
ranks of the company may suggest that the employee’s compensation
is not reasonable. See Rapco, Inc. v. Commissioner, 85 F.3d at
954.
Isidore and Steven Klein paid themselves and Jeffrey
Schwaeber generously.
Petitioner contends that it paid all of its employees at or
above market rate salaries. We disagree. Petitioner presented
no persuasive evidence that it paid all of its employees at or
above market rate salaries. On brief, petitioner concedes that
it did not have a bonus program during the years in issue. There
is no evidence that any of petitioner’s employees other than
Isidore and Steven Klein shared in the large distribution of
profits petitioner made at yearend in 1993, 1994, and 1995. Cf.
Home Interiors & Gifts, Inc. v. Commissioner, 73 T.C. 1142, 1159-
1160 (1980) (compensation paid to the taxpayer's shareholder-
employees was reasonable in part because the taxpayer had
longstanding practice of paying all of its key employees on the
basis of commissions). This factor favors respondent.
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