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Method FYE 1995 FYE 1996
Guideline cos. CEO compensation $1,019,418 $1,124,167
Guideline cos. percent of sales 1,175,186 405,388
Guideline cos. net margins 2,150,000 1,500,000
Average of the methods 1,448,201 1,009,852
In addition, taking into consideration the $547,350 Mr.
Reeves was underpaid as of December 31, 1995, the reasonable
compensation for petitioner’s FY 1995 is increased to $1,995,551.
C. Character and Condition of the Company
This factor requires the Court to focus on petitioner’s
size as measured by its sales, net income, or capital value; the
complexities of the business; and general economic conditions.
See Elliotts, Inc. v. Commissioner, 716 F.2d at 1246.
Petitioner was a relatively small company that had secured
itself a market niche enabling it to earn high profit margins on
its product sales and services.
Petitioner’s income was modest until 1993 when it began to
experience a substantial increase. Gross sales grew from
$661,928 in FYE June 30, 1991, to $2,074,682 and $1,936,476 in
FYE June 30, 1993 and 1994, respectively, and continued to
increase in the fiscal years at issue to $12,501,980 and
$5,709,686, with net margins of 8.7 and 7 percent, respectively.
Petitioner’s net income was substantially higher than the
guideline companies’ average and each guideline company’s
individually, except for NBTY, Inc.’s FY 1996. Moreover,
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