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Buffalo Tool & Die Manufacturing Co. v. Commissioner, 74 T.C.
441, 452 (1980), we may be selective in determining what portions
of an expert’s opinion, if any, to accept, Parker v.
Commissioner, 86 T.C. 547, 562 (1986).
b. Petitioner’s Expert
Petitioner’s expert, David Ostrove (Mr. Ostrove), is an
attorney and C.P.A. He has been engaged as an expert witness on
numerous occasions, including cases involving reasonable
compensation issues. Approximately one-third of Mr. Ostrove’s
report was voluntarily redacted by petitioner’s counsel because
it comprised legal analysis and argument, including citations and
discussion of caselaw and of a published revenue ruling. The
balance of the report consists of Mr. Ostrove’s analysis of (1)
petitioner’s return on equity (ROE) for the 1979-84, 1986-90, and
1994-97 tax years and (2) the reasonableness of Mrs. Harrison’s
compensation in terms of his application of the Elliotts, Inc.
factors.
Mr. Ostrove acknowledged during the voir dire that he had no
formal training in conducting compensation surveys; comparing or
evaluating types or components of compensation; corporate
finance; or valuation appraisal. Moreover, in response to a
hypothetical question by the Court, he admitted that he lacked
the expertise necessary to advise a corporate client as to the
appropriate salary to offer candidates for director of a new
division.
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