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c. Baker’s Aid
Petitioner argues that the best evidence of how much
comparable firms pay officers’ holding comparable positions was
the testimony that the two owners/officers of Baker’s Aid (a
father and son) each earned $1-$2 million per year in 1993 and
1994. We disagree because there is no evidence of their duties
or accomplishments and because Baker’s Aid had annual sales of
about $40 million in 1993 and 1994, which is more than 10 times
petitioner’s sales in those years.
d. Conclusion
This factor suggests that it would have been reasonable to
pay Isidore Klein up to $200,000 in 1993 and $200,000 in 1994 and
to pay Steven Klein up to $300,000 in 1993, $300,000 in 1994, and
$439,284, or for simplicity, $440,000, in 1995.
C. Applying the Factors From the Perspective of the
Hypothetical Independent Investor
We apply each of these five factors from the standpoint of
whether a hypothetical independent investor would approve the
compensation petitioner paid to Isidore and Steven Klein in the
years in issue. See Dexsil Corp. v. Commissioner, 147 F.3d at
100; Rapco, Inc. v. Commissioner, 85 F.3d at 954-955; Elliotts,
Inc. v. Commissioner, 716 F.2d at 1247.
1. Isidore Klein
We believe that an independent investor would not have
approved the increase in Isidore Klein’s longstanding
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