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We also find questionable some of the data from the surveys
Mr. Reilly used in forming his opinion. For example, Mr. Reilly
opined that reasonable compensation for Dennis was between
$598,690 and $1,097,500 for 1996. The $1,097,500 results in
large part from the use of data from the Aspen survey.
Specifically, Mr. Reilly used annual compensation for a COO of
$870,000 reported in the Aspen survey for the third quartile
amount. The third quartile compensation was computed on the
basis of information reported by only three incumbents for the
COO category.4 The average amount was $132,000 and the median
was $115,000. It is clear therefore that the $870,000 of the
third quartile was reported by one incumbent. One company
reporting in the $2 to $5 million of sales category also reported
$870,000. The $870,000 reported by the two companies is
substantially out of line with all other companies reporting COO
compensation in all categories. Therefore, we do not find the
$870,000 to be reliable.
We also find that Mr. Reilly's use of the income data from
petitioner's Forms 1120 for the 2 years at issue in his analysis
was inherently flawed because of the distortion caused by the
section 481(a) adjustment. The adjustment resulted from
petitioner's change in accounting methods in 1991. Before
4The survey notes that where fewer than three incumbents
report in a given category, median, first quartile, and third
quartile information is not statistically relevant.
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