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3. Whether To Assume DGA Would Reduce Executive
Compensation
Respondent contends that DGA’s projected net income should
be increased on the assumption that the Dallas family officers
are receiving unreasonable compensation and that those amounts
would be reduced voluntarily or as a result of litigation brought
by a minority shareholder if a minority block of DGA shares were
sold to an unrelated investor. Respondent relies on AE’s report
to support this position. Petitioner contends that AE is
incorrect and that DGA’s compensation to petitioner and his sons
would not decrease after the hypothetical sale, leading to higher
income for DGA.
The record does not contain the quality of factual analysis
customarily used by courts in deciding whether compensation is
reasonable. Further, there is nothing in the record to suggest
that DGA is planning to change how it pays petitioner and his
sons. See Davis v. Commissioner, 110 T.C. 530 (1998). Thus, we
have no more reason to assume changes in DGA’s executive
compensation policies than we have to assume changes in dividend
paying policies or a change in its S corporation status.12 On
this record we, unlike AE and Empire,13 do not assume DGA’s
12 We disagree with petitioner’s expert Empire on all of
these points.
13 Empire’s position on executive compensation is more
(continued...)
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