- 32 -
F. Comparison of Salaries and Bonuses Petitioner Paid
Mr. and Mrs. Myers With Formal Dividend Distributions
The failure to declare and pay dividends suggests that
purported compensation payments may be disguised dividends.
Charles Schneider & Co. v. Commissioner, 500 F.2d 148, 153 (8th
Cir. 1974), affg. T.C. Memo. 1973-130.
Although Mr. and Mrs. Myers were extremely well compensated,
commencing with petitioner’s fiscal year ended July 31, 1993,
petitioner made no formal dividend distributions from the time of
its incorporation in late 1986 through July 31, 1996.
This factor favors respondent.
G. Prevailing Rates of Compensation for Comparable
Positions in Comparable Concerns
In deciding whether compensation to an employee is
reasonable, we compare it to compensation paid to persons holding
comparable positions in comparable companies. Mayson
Manufacturing Co. v. Commissioner, 178 F.2d at 119; sec. 1.162-
7(b)(3), Income Tax Regs. In assessing this factor, we consider
the testimony of the parties’ expert witnesses. As trier of
fact, we are not bound by the opinion of any expert witness and
will accept or reject expert testimony, in whole or in part, in
the exercise of sound judgment. Helvering v. National Grocery
Co., 304 U.S. 282, 295 (1938); Silverman v. Commissioner, 538
F.2d 927, 933 (2d Cir. 1976) (and cases cited therein), affg.
T.C. Memo. 1974-285.
Page: Previous 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 NextLast modified: May 25, 2011