Beiner, Inc. - Page 19

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          1999         2000                                                           
          Excess gross profits          $619,740    $1,219,270                        
          Reasonable salary              166,000       166,000                        
          Reasonable incentive           121,000       147,823                        
          Total                        906,740     1,533,093                          
               As further support for his opinion, Wertlieb also calculated           
          and compared for petitioner and each of the 34 companies (1) the            
          percentage return on equity and (2) the ratio (expressed as a               
          percentage) of gross profit to sales.  As to the former, Wertlieb           
          calculated petitioner’s pretax return on equity (taxable income             
          as ascertained by Wertlieb divided by ending shareholder equity)            
          as follows:                                                                 
          1999         2000                                                           
          Sales                             $3,473,802   $3,485,568                   
          Cost of goods sold                 1,760 084    1,064,976                   
          Gross profit                       1,713,718    2,420,592                   
          Gross profit at 90th percentile    1,093,978    1,201,322                   
          Excess gross profit                  619,740    1,219,270                   
          Reasonable salary                    166,000      166,000                   
          Reasonable incentive                 121,000      147,823                   
          Total reasonable compensation        906,740    1,533,093                   
          Officer compensation deducted      1,087,000    1,350,000                   
          Over (under) reasonable              180,260     (183,093)                  
          Taxable income, as reported          143,926      579,984                   
          Adjusted taxable income              324,186      396,891                   
          Shareholder equity at end of year    1372,857      754,857                  
          Pretax return on equity                86.9%       52.6%                    
                    1 This amount was actually $372,513.  We consider                 
               the difference in figures immaterial to our analysis.                  
          He compared these returns to the 34 companies as follows:                   










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