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Respondent concludes that Beiner’s services for petitioner did
not entitle it to pay to him the compensation that it did.
We disagree with respondent’s assertions and conclusion. As
we see it, the most important element of petitioner’s business
was its purchase of Allen-Bradley parts at prices less than those
paid by the authorized distributors, and those purchases at those
prices were the direct product of one employee; i.e., Beiner.
But for petitioner’s employment of Beiner, petitioner would not
have been able to obtain its Allen-Bradley inventory and to
operate as profitably as it did, let alone to even operate at
all. Given the double-digit rates of return on petitioner’s
equity during the subject years, we believe that a hypothetical
inactive independent investor who was knowledgeable of Beiner’s
role in petitioner’s operation and the significant effect that he
had upon its profitability would have paid the disputed
compensation to Beiner in order to retain his services.
Moreover, contrary to respondent’s assertion, Beiner did not
spend little time in petitioner’s business during each subject
year. While respondent asks the Court to find as a fact that
Beiner worked in petitioner’s business approximately 6 to 10
hours per week during the subject years and that Caldwell was at
that time the business’s spearhead, the credible evidence in the
record supports a contrary finding, which we make, that Beiner
during the subject years worked in petitioner’s business
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