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gravel operations. In 1995, petitioner had gross receipts of
$5.31 million and capital value of $2.89 million (on the basis of
shareholder equity). In 1996, petitioner had gross receipts of
$6.14 million and capital value of $3.13 million (on the basis
shareholder equity).
We find that the size and complexity of petitioner's
business warrants high compensation for its officers.
4. General Economic Conditions
General economic conditions may affect a company's
performance and thus show the extent of the employee's effect on
the company. See Rutter v. Commissioner, supra at 1271; Mayson
Manufacturing Co. v. Commissioner, supra at 119. This factor
helps to determine whether the success of a business is
attributable to general economic conditions, as opposed to the
efforts and business acumen of the employee. Adverse economic
conditions, for example, tend to show that an employee's skill
was important to a company that grew during the bad years. See
Mad Auto Wrecking, Inc. v. Commissioner, T.C. Memo. 1995-153.
Petitioner's sales increased from $4.62 to $6.14 million
during the 2 years at issue. There is no evidence that
petitioner's success resulted from general economic conditions.
The record shows that petitioner's success resulted in large part
from the expertise of Dennis and Curtis and their long hours of
hard work.
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