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e. General Economic Conditions
We analyze the general economic conditions related to the
relevant business. General economic conditions may affect a
business’s performance and indicate the extent (if any) of the
employee’s effect on the company. Mayson Manufacturing Co. v.
Commissioner, 178 F.2d 115, 119-120 (6th Cir. 1949), revg. and
remanding a Memorandum Opinion of this Court dated Nov. 16, 1948.
Adverse economic conditions, for example, tend to show that an
employee’s skill was important to a company that grew during the
bad years.
The record does not indicate whether petitioner’s success
during the subject years was attributable to the work of one or
more employees or to the general economic conditions. The record
indicates, however, that the economic conditions related to
petitioner’s business were not adverse. As to both Emile and
Louise, we are unable to answer the question affirmatively.
f. Comparison of Salaries with Distributions to
Shareholders and Retained Earnings
We compare Emile’s and Louise’s compensation first to
petitioner’s distributions and then to its retained earnings.
The fact that petitioner has never paid a dividend is a factor
that may suggest that some portion of the amounts paid as
compensation to a shareholder/employee is really a dividend.
Owensby & Kritikos, Inc. v. Commissioner, 819 F.2d 1315,
1322-1323 (5th Cir. 1987), affg. T.C. Memo. 1985-267; see also
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