- 41 -
significantly higher than the 90th-percentile level shown by the
RMA data for the same years.
Our acceptance of Ding’s thesis, then, leads us to apply the
RMA 90th-percentile ratios to petitioner’s sales, which results
in reasonable compensation amounts significantly less than
petitioner’s actual payments to Jack. This process leads us to
initial calculations of $520,000 for 1995 and $600,000 for 1996
as reasonable compensation amounts for Jack’s services.
(2) Loan Guaranty
Hakala opined, in his expert witness report, that Jack was
entitled to an additional $5,000 reasonable compensation “for
providing his personal guarantee to secure a short-term working
capital line of credit in 1995". Respondent has conceded the
allowability of this additional amount. Petitioner does not
dispute this item; we accept it. Owensby & Kritikos, Inc. v.
Commissioner, 819 F.2d at 1325 n.33.
Accordingly, we increase our 1995 reasonable compensation
determination to $525,000.
(3) Previous Underpayment
Petitioner contends that Jack was underpaid in previous
years, particularly 1992 and 1993. See supra table 3.
Petitioner argues as follows:
While there are no corporate minuets [sic] declaring
any part of Mr. Brewer’s compensation for 1995 and 1996 as
make up salary, a good faith argument for extension of
existing law can be made where it is apparent from the facts
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