- 21 -
“profit” to refer to the excess of the dentist’s receipts from
his practice of dentistry over the costs of earning those
receipts but without any reduction for the value of the dentist’s
own services. The case, thus, reflects the unremarkable
proposition that the return to an individual proprietor equals
the receipts of the proprietorship less the expenses of the
proprietorship, viz, the “profit” of the proprietorship.
That proposition was useful to us in Bianchi because we
assumed that (1) the proprietorship in question provided a
service, (2) all of the proprietorship’s income resulted from the
provision of that service, and (3) the proprietor was the sole
service provider employed by the proprietorship. We were, thus,
able to determine the value of the services provided by the
individual proprietor to his proprietorship, and to use the
result to test the reasonableness of the compensation paid to him
by his wholly owned corporation.
We cannot analogize petitioner to an individual
proprietorship and employ the stated proposition to find that the
value of the services provided by the shareholder surgeons to
petitioner is equal to the profit made by petitioner (determined
without any deduction for the compensation of the shareholder
surgeons). One reason why we cannot do so is that the
shareholder surgeons were not the only service providers employed
by petitioner. There were also the nonshareholder surgeons,
Page: Previous 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 NextLast modified: May 25, 2011