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receive a substantial portion of their annual compensation from
incentive compensation or bonuses tied to their company’s
earnings and profitability for that year. Yet, contrary to
petitioner’s experts’ (Messrs. Matthews’s and Dorf’s) claims, no
strong linkage existed between petitioner’s financial performance
in a given year and Mr. Wechsler’s bonuses and total compensation
for that year. We agree with respondent’s expert, Mr. Hakala,
that petitioner’s compensation practice as to Mr. Wechsler would
put an independent investor in the highly disadvantageous
position of absorbing all the downside in petitioner’s bad years
while causing that investor to share inadequately in the upside
in petitioner’s good years. In our opinion, all of the foregoing
strongly indicates that the $37.992 million petitioner paid Mr.
Wechsler from 1992 through 1998 was not reasonable compensation,
and he was overcompensated during the 1992 through 1999 years in
issue. See Rapco, Inc. v. Commissioner, supra at 955 (sustaining
Tax Court’s determination as to unreasonableness of controlling
shareholder’s compensation because, among other things, (1)
taxpayer-corporation’s compensation scheme was bonus-heavy and
salary-light, suggesting masked dividends, (2) taxpayer could
point to no consistent method for bonus calculation, and (3) as
ultimate decision-maker as to his own pay, controlling
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