Miller & Sons Drywall, Inc. - Page 40

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               H.  Petitioner’s Salary Policy as to All Employees                     
               Courts have considered the salary policy of the taxpayers as           
          to all employees (sometimes referred to as internal consistency)            
          in determining whether its shareholder-employees received                   
          reasonable compensation.  See Charles Schneider & Co. v.                    
          Commissioner, 500 F.2d at 152; Home Interiors & Gifts, Inc. v.              
          Commissioner, 73 T.C. at 1159.  This factor is probative because            
          it questions whether the shareholder-employees, because of their            
          status as such, were compensated differently from petitioner’s              
          other employees.  See Owensby & Kritikos, Inc. v. Commissioner,             
          819 F.2d at 1329.  For example, a reasonable, longstanding, and             
          consistently applied compensation plan is evidence of reasonable            
          compensation.  See Elliotts, Inc. v. Commissioner, 716 F.2d at              
          1247.                                                                       
               In this case, petitioner paid bonuses to its non-                      
          shareholder-employees and shareholder-employees.  The bonuses               
          that the nonshareholders received were not paid annually,                   
          appeared never to exceed their respective annual compensation,              
          were relatively insignificant in amount, and were not part of a             
          longstanding, consistently applied compensation plan.                       
               Conversely, the bonuses paid by petitioner to its                      
          shareholder-employees were paid annually (except that Darle did             
          not receive a bonus in 1997, 1998, or 1999), and they often                 
          exceeded each shareholder-employee’s base annual salary.  More              






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