E.J. Harrison & Sons, Inc. - Page 5

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                                     Discussion                                       
               Since the Court of Appeals affirmed our determination that a           
          portion of Mrs. Harrison’s salary should be disallowed as                   
          unreasonable and instructed us that it was not unreasonable for             
          petitioner to have paid her at least as much as it paid her sons            
          during the audit years, we would not be amiss to find that she              
          was reasonably compensated at some level between her actual                 
          compensation and the compensation paid her sons.                            
               In its original brief, petitioner states its position as               
          follows:  “It is E.J. Harrison & Sons [sic] position that the               
          services rendered by Myra Harrison, including her guaranty of               
          company notes, merited the compensation she received and was                
          reasonable under the independent investor analysis set forth in             
          Elliotts, Inc. v. Commissioner of Internal Revenue, * * *                   
          [supra].”  In Elliotts, Inc. v. Commissioner, supra at 1245, the            
          United States Court of Appeals for the Ninth Circuit identified             
          the factors that identify what is “reasonable compensation” under           
          section 162(a)(1).  Among those factors is a comparison of the              
          employee’s salary with those paid by similar companies for                  
          similar services: viz, an “External Comparison”.  Id. at 1246.              
          On brief, under the heading “External Comparison”, petitioner               
          states:  “The unique nature of the services provided by Myra                
          Harrison makes an external comparison extremely difficult.  * * *           
          As the public face of a company dependent on public contracts,              






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