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(2) Petitioner grew rapidly between 1991 and 1996. In 1995,
it was ranked number 36 of Fleetwood mobile home retailers in the
nation; in 1996, it climbed to number 13 in the nation.
(3) Jack personally guaranteed the working capital lines of
credit of petitioner.
(4) Petitioner did not provide a defined benefit or profit-
sharing plan to Jack. The only nonsalary benefit that petitioner
provided to Jack was health insurance; Jack (and, presumably,
Mary) was the only employee who did not receive paid sick and
vacation leave.
(5) Under Jack’s control, petitioner survived several
economic downturns when many other mobile home retailers went out
of business.
The following indicia of relatively low reasonable
compensation are present in the instant case:
(1) The claimed compensation petitioner paid to Jack in 1995
and 1996 constituted 8.5 percent and 8.7 percent, respectively,
of petitioner’s gross sales, and 82 percent and 85 percent,
respectively, of petitioner’s taxable income. These percentages
exceed those of most similar companies.
(2) Petitioner did not maintain a compensation policy for
Jack. Because Jack controlled the corporation, he was able to
set his own compensation.
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