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Respondent also relies on Alpha Med., Inc. v. Commissioner,
supra, and Eberl’s Claim Serv., Inc. v. Commissioner, T.C. Memo.
1999-211, affd. 249 F.3d 994 (10th Cir. 2001), for the
proposition that the ROE should be analyzed only for each tax
year in issue separately. Petitioner argues that respondent’s
analysis should not be relied on because he incorrectly
interpreted this Court’s jurisprudence.
We agree that the independent investor would initially focus
on each of the 3 years in issue separately. However,
respondent’s reliance on Alpha Med., Inc. and Eberl’s Claim
Serv., Inc. is partially misplaced. Unlike those cases, the
total capital investment of $11,300, as of 1982, made by the
shareholder-employees in this case was not de minimis considering
a competitor could establish a drywall construction business with
only $300. Also, in this case, there are three shareholder-
employees, compared to a single shareholder-employee in each of
those cases. These differences sufficiently distinguish this
case from the reasoning used in Alpha Med., Inc. and Eberl’s
Claim Serv., Inc. to view the years in issue only separately.
Thus, we shall consider the years in issue collectively and
separately.
Petitioner’s ROE for the tax year ended June 30, 1998, was
7.8 percent, for the tax year ended June 30, 1999, negative 4.1
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