- 57 -
a COO. Therefore, on the basis of the data that we have found
reliable for other companies in the industry contained in Mr.
Reilly's report, we find that for both years in issue at least
$385,000 is reasonable compensation for Dennis as CEO and at
least $250,000 is reasonable for Curtis as COO.
6. Petitioner's Compensation Policy for All Employees
Courts have considered the taxpayer's compensation policy
for its other employees in deciding whether compensation is
reasonable. See Mayson Manufacturing Co. v. Commissioner, 178
F.2d at 119; Home Interiors & Gifts, Inc. v. Commissioner, 73
T.C. at 1159. This factor focuses on whether the entity pays top
dollar to all employees, including both stockholders and
nonstockholders. See Owensby & Kritikos, Inc. v. Commissioner,
supra at 1329-1330. We look to this factor to determine whether
Dennis and Curtis were compensated differently than petitioner's
other employees merely because of their status as stockholders.
See id.
Petitioner paid its employees the highest wages under the
union contracts. That fact, along with petitioner's success,
supports paying Dennis and Curtis the highest salaries for
officers. The salaries paid to Dennis and Curtis were
substantially lower than the compensation paid to top executives
of other companies. This supports a finding that part of the
bonus was compensation for services rendered during the year.
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