- 15 -
week), for an annual salary of $39,998. He further concluded
that a bookkeeper/office manager for Renier with Maria’s
qualifications reasonably would have been paid $7.37 per hour and
worked 2,080 hours per year, for a total annual salary of
$15,330. To these amounts, Mr. Sliwoski added a fringe benefit
equal to 20 percent of base wages for each employee. Finally,
Mr. Sliwoski adjusted these results using changes in the consumer
price index for 1989 through 1994 to determine reasonable
compensation for each year in the base period. Mr. Sliwoski then
treated all compensation to related employees that exceeded the
foregoing amounts, plus associated payroll taxes, as excess
compensation that should be added back to produce normalized
income. This resulted in increases to Renier’s reported net
income for the base period of $357,789, or an average of $61,925
per year.
Mr. Kramer, by contrast, calculated the excess compensation
to related employees to be only $15,000 per year, which he
divided by 12 and then multiplied by 69.33 to arrive at a total
excess compensation of $86,663 during the base period. In
reaching the $15,000 per year figure, Mr. Kramer concluded that
approximately 15 percent of the time devoted to management duties
by related parties was attributable to duplicated effort and
therefore constituted excess compensation.
After considering the reasonable compensation adjustments
proposed by each expert, we conclude that neither accurately
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