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particular case. See Elliotts, Inc. v. Commissioner, supra at
1246; Haffner’s Serv. Stations, Inc. v. Commissioner, supra.
This test allows us to decide whether the amount of compensation
paid to petitioner’s shareholder-employees would have been the
same had they engaged in an arm’s-length negotiation. See also
Heil Beauty Supplies, Inc. v. Commissioner, supra at 194. One
important inquiry in applying this test is whether the
corporation’s shareholders received a fair return on their
investments. See Rapco, Inc. v. Commissioner, supra at 955.
In performing our analysis, we generally review each
shareholder-employee’s compensation separately because whether
his salary was reasonable depends on the services he performed.
See RTS Inv. Corp. v. Commissioner, supra. In this case, we
shall review Dean’s and Rocky’s salaries concurrently because
they performed similar services for petitioner.
II. Burden of Proof
Under Rule 142(a), petitioner has the burden of proving that
the compensation paid to its shareholder-employees was reasonable
for deduction purposes. See Welch v. Helvering, 290 U.S. 111,
115 (1933). Section 7491(a) provides a taxpayer with the
opportunity to shift the burden of proof to the Commissioner
under specific circumstances. To shift the burden of proof, a
taxpayer must have complied with all the requirements in section
7491(a). See Higbee v. Commissioner, 116 T.C. 438 (2001); E.J.
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