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there was internal consistency in salary payments throughout
petitioner’s ranks. This factor also strongly favors respondent.
F. Mr. Wechsler’s Loans to Petitioner
In some circumstances, a key employee-shareholder’s
interest-free loans to the corporation may weigh in favor of
higher compensation to that employee. See Owensby & Kritikos,
Inc. v. Commissioner, 819 F.2d at 1325 n.33 (noting that key
employee-shareholders’ personal guaranties of loans to the
corporation also weighed in favor of munificent compensation, but
stating that the record was unclear as to the riskiness of the
loans); R.J. Nicoll Co. v. Commissioner, 59 T.C. 37, 51 (1972)
(similar).
Mr. Wechsler made short-term cash loans to petitioner during
September and October 1998. During those months, beginning on
September 1, Mr. Wechsler made loans to petitioner totaling
$2,562,400 which petitioner repaid between September 24 and
13(...continued)
petitioner’s deduction of the compensation paid to those
employees. Petitioner, however, has made no meaningful attempt
to compare the qualifications of and services rendered by those
employees to the qualifications of and services rendered by Mrs.
Wechsler and Gilbert. As a result, we have no way of knowing how
similar the services performed by those other employees were to
the services performed by Mrs. Wechsler and Gilbert. Moreover,
those other employees (unlike Mrs. Wechsler and Gilbert) were
unrelated to Mr. Wechsler. Presumably, Mr. Wechsler determined
and set the compensation that petitioner paid to those other
employees (who were not close family members of Mr. Wechsler) in
an arm’s-length manner. The same cannot be said of the
compensation Mr. Wechsler had petitioner pay to his wife and to
his brother.
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