Vitamin Village, Inc. - Page 15

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               Although Mr. Reeves did not devote 100 percent of his time             
          to petitioner’s business during the fiscal years at issue, as the           
          only executive and manager he was the driving force behind                  
          petitioner’s success.16  Mr. Reeves was a highly motivated                  
          employee who worked over 80 hours per week for petitioner during            
          the first 6 months of its FY 1995 and a substantial amount of               
          time during the second half of its FY 1995.  Despite managing two           
          other companies during petitioner’s FY 1996, Mr. Reeves continued           
          to devote a substantial amount of time to petitioner’s                      
          operations, which led to its further success.                               
               B. External Comparison                                                 
               This factor compares the employee’s compensation with that             
          paid by similar companies for similar services.  Elliotts, Inc.             
          v. Commissioner, supra at 1246; see sec. 1.162-7(b)(3), Income              
          Tax Regs.  Courts often use expert witness opinions to evaluate             
          the reasonableness of compensation.  Nonetheless, this Court is             
          not bound by the opinion of any expert witness and may accept or            
          reject expert testimony in the exercise of sound judgment.                  

               16 The record indicated the incorporation of UMI and CTC               
          resulted in Mr. Reeves’s performing fewer services and spending             
          less time operating petitioner without delineating the number of            
          hours per week Mr. Reeves spent operating petitioner.  However,             
          the record did indicate that:  CTC was a separate corporation for           
          one-half of petitioner’s FYE June 30, 1995, and UMI was a                   
          separate corporation for 1 month of petitioner’s FYE June 30,               
          1995; Mr. Reeves spent over 80 hours a week operating petitioner            
          before CTC and UMI were spun off; and shortly after CTC and UMI             
          were spun off Mr. Reeves’s overall time spent working increased             

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