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supra at 1243-1245. The five factors are: (1) The employee’s
role in the company; (2) a comparison of the compensation paid to
the employee with the compensation paid to similarly situated
employees in similar companies (external comparison); (3) the
character and condition of the company; (4) whether a conflict of
interest existed that might have permitted the company to
disguise dividend payments as deductible compensation; and (5)
whether the company’s payments of compensation to all of its
employees were internally consistent (internal consistency). Id.
at 1245-1248. As to each factor, we ask ourselves the following
question: “Would a hypothetical inactive independent investor
consider the factor favorably to require the payment of the
disputed compensation to Beiner in order to retain his services
during each of the subject years?” See Haffner’s Serv. Stations,
Inc. v. Commissioner, supra; cf. Elliotts, Inc. v. Commissioner,
supra at 1245. An answer in the negative indicates that the
payment of the compensation was not sufficiently tied to Beiner’s
services to constitute personal service income but was more
likely a distribution of earnings. An answer in the affirmative
supports deducting the disputed compensation as personal service
compensation. A relevant consideration in answering our question
is whether the hypothetical inactive independent investor, after
taking into account the amount of the compensation paid to
Beiner, would receive at least the minimum return anticipated on
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