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approximately 38 hours a week as its most valuable employee. Nor
does the record support respondent’s second assertion that
Beiner’s brother was a primary income-producing factor in
petitioner’s business. When Beiner caused petitioner in 1992 to
limit its business to Allen-Bradley parts, Beiner’s brother
disaffiliated himself entirely from any continued participation
in the business. Although respondent notes correctly in his
third assertion that Beiner spent approximately one-third of his
time during the subject years working for California Controls,
respondent ignores in this regard that Beiner spent the other
two-thirds of his time working for petitioner in a role that was
most significant to its existence and profitability.
We conclude that a hypothetical inactive independent
investor would consider this factor favorably to require the
payment of the disputed compensation to Beiner in order to retain
his services during each of the subject years.
2. External Comparison
This factor compares the employee’s salary with the salaries
paid by similar companies for similar services. Elliotts, Inc.
v. Commissioner, 716 F.2d at 1246.
Wertlieb’s testimony is the only evidence in the record as
to this factor. Wertlieb reviewed the financial statements of
the 34 referenced companies and the compensation paid to their
chief executive officers. Wertlieb opined that petitioner was
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