## F I L E D United States Court of Appeals Tenth Circuit 

### MAY 4 2001 

### PATRICK FISHER Clerk PUBLISH
UNITED STATES COURT OF APPEALS

TENTH CIRCUIT

EBERL’S CLAIM SERVICE, INC., Petitioner - Appellant, v. COMMISSIONER OF INTERNAL REVENUE, Respondent - Appellee. No. 99-9033

Appeal from the United States

Tax Court (T.C. No. 12385-97)

Mark R. Kravitz (Joseph A. Sanfilippo, Jr., Wiggin & Dana, New Haven, Connecticut and John D. Moats, Englewood, Colorado, with him on the briefs), Wiggin & Dana, New Haven, Connecticut, for the Peti tioner-Appellant. Joan I. Oppenheimer (Gilbert S. Rothenberg with heron the brief), Tax Division, Department of Justice, Washington, D.C., for the Re spondent-Appellee.

Before LUCERO , McKAY and MURPHY , Circuit Judges.

LUCERO , Circuit Judge.

The Commissioner of Internal Revenue determined def iciencies and additions to tax for Eberl’s Claim Service, Inc.’s (“taxpayer”) fiscal years 19921 Taxpayer’s fiscal year 1992 ended on May 31, 1993 , and its fiscal year

1993 ended on May 31, 1994. - 2 - and 1993, 1 in which taxpayer sought to deduct $4,340,000 and $2,080,000, respectively, for compensation to Kirk J. Eberl (“E berl”). Contending that those amounts were excessive, the Commissioner asserts Eb erl’s salary constituted disguised dividend payments that should have been s ubject to taxation. The Tax Court found taxpayer could deduct compensation up t o $2,340,000 and $1,080,000 and was not liable for penalties. Taxpayer appeals; exercising jurisdiction under I.R.C. § 7482, we affirm.
I Eberl is the founder, president, and sole sharehold er of taxpayer, a Colorado corporation. Taxpayer is a catastrophic c laims adjusting company that provides the services of independent claims adjuste rs to major insurance companies. Insurance companies rely on in-house ad justers to process most claims, but during busy periods following major dis asters they turn to contractors like taxpayer for additional help. Taxpayer was founded as a sole proprietorship in 19 87 and incorporated in 1988. Eberl made an initial capital investment of $500 and has not invested any additional capital. He was the only member of taxp ayer’s board of directors from June 8, 1988 through the years in question. His wi fe, Grace Eberl, has been the- 3 -

company’s corporate secretary and treasurer since i ncorporation. Eberl has always been solely responsible for taxpayer’s busin ess decisions and managerial functions (with the exception of accounting), inclu ding marketing, subcontracting with individual claims adjusters, and maintaining r elationships with insurance companies that use taxpayer’s services. During the years in question, Eberl worked long hours, occasionally from 4:30 a.m. unti l midnight, and was required to be away from home about seventy-five percent of the time. His superior qualification for his position and his indispensabi lity to taxpayer’s business are undisputed, as is the demanding nature of his work. Eberl’s July 19, 1988 employment agreement with taxpayer did not fix the amount of his compensation or a formula for its computation, though taxpayer’s attorney, certified public accountant, and financia l adviser had discussed with Eberl his desire to be compensated at twenty to twe nty-five percent of taxpayer’s gross receipts each year. However, a 1992 amendmen t loosely tied Eberl’s salary to gross revenues, providing that “[t]he Corporatio n shall pay [Eberl] a commission based upon the gross revenue collected f or services performed for casualty insurance companies who contract with the Corporation due to Employee’s efforts.” (Jt. Ex. 13-M.) The corporat ion paid regular salaries to only a small number of additional employees. Grace Eberl received an annual salary of $120,000, and beginning in 1991 her mothe r drew a salary as an office- 4 -

manager. Neither received bonuses. The only otheremployees during the period in question were part-time clerical staff. Althoug h independent claims adjusting companies typically pay their adjusters sixty to si xty-five percent of the fee charged to an insurance company, taxpayer paid its adjusters seventy percent. Operating results and Eberl’s compensation from inc orporation through the fiscal years at issue were as follows:
Year Eberl’s Salary ($) Gross

Receipts ($) Net

Profits ($) Taxable

income ($) Eberl’s Salary

as a % of Gross Receipts 1988 40,000 282,682 (3609) (3609) 14.1 1989 608,000 4,141,872 0 (3609) 14.7 1990 300,000 2,190,835 (36,233) (39,842) 13.7 1991 190,000 2,193,708 2861 (36,981) 8.7 1992 4,340,000 20,438,803 22,439 (14,542) 21.2 1993 2,080,000 9,168,585 41,935 27,393 22.7 (Appellee’s Br. at 9, 11.) Annual and cumulative r etained earnings in those years were as follows: Year Annual ($) Cumulative ($) 1988 (4655) (4655) 1989 (5750) (10,405) 1990 (41,276) (51,681) 1991 4650 (47,031) 1992 16,748 (30,283) 1993 37,098 6815 Eberl’s Claim Serv., Inc. v. Comm’r , No. 12385-97, 77 T.C.M. (CCH) 2336, slip mem. at 12 (T.C. Memo. June 25, 1999). The companyhas never paid a dividend.- 5 -

Due in part to an extraordinary number of major cat astrophes, 1992 and 1993 were lucrative years for independent claims ad justers. Five of the ten most costly insured catastrophes in the United States oc curred during taxpayer’s fiscal years 1992 and 1993, including Hurricane Andrew, th e Northridge earthquake, severe winter storms in twenty states, Hurricane In iki, and brush fires in California. The sharp increase in gross receipts i n those two years reflects the frequency with which insurance companies turned to taxpayer to supply independent adjusters to process the unusually larg e number of claims. Faced with the question whether Eberl’s compensatio n in 1992 and 1993 was reasonable in amount, the Tax Court concluded t hat “a substantial part of Eberl’s compensation was a disguised dividend and not purely for services.” Id. at 32. Although the Commissioner’s expert, James F . Carey, stated in his report that compensation of $500,000 and $400,000 would have been reasonable in those two years, he acknowledged at trial that taxp ayer could have paid Eberl $2,340,000 in 1992 and $1,080,000 in 1993 while kee ping retained earnings of $2 million and $1 million—figures he called reasonable. Based on that assessment, the Tax Court determined that reasonabl e compensation to Eberl could have been as much as $2,340,000 in 1992 and $ 1,080,000 in 1993 and that payments above those amounts were taxable as divide nds.- 6 -

Finally, the Tax Court rejected the Commissioner’s determination that taxpayer was liable for a penalty under I.R.C. § 66 62 for substantial understatement of tax owed. The court found that E berl reasonably believed that compensation equal to twenty to twenty-five percentof gross receipts would be a reasonable salary and that he believed his accountant, who signed taxpayer’s tax returns, agreed. See I.R.C. § 6664(c)(1) (providing that the § 6662 pen alty does not apply if the taxpayer shows that there was reas onable cause for the underpayment and that taxpayer acted in good faith)

. II “We review tax court decisions ‘in the same manner and to the same extent as decisions of the district courts in civil actions tried without a jury.’” Kurzet v.
Comm’r , 222 F.3d 830, 833 (10th Cir. 2000) (quoting I.R.C . § 7482(a)(1)). The reasonableness of an expense is a question of fact subject to clear error review. Pepsi-Cola Bottling Co. v. Comm’r , 528 F.2d 176, 179 (10th Cir. 1976). A. Determination of reasonableness under I.R.C. § 162(a)(1) A taxpayer may deduct “a reasonable allowance for s alaries or other compensation for personal services actually rendere d.” I.R.C. § 162(a)(1). The taxpayer bears the burden of establishing that its expenses are reasonable under § 162. Kurzet , 222 F.3d at 834; Pepsi-Cola Bottling , 528 F.2d at 179.- 7 -

For closely held corporations, the identity between shareholders and employees creates an incentive to distribute earnin gs in the form of compensation rather than in the form of dividends. Compensation is a deductible expense, while dividend payments are subject to the two-tiersystem of corporate taxation. Absent a third-party interest in limiting compensat ion for the sake of profitability, dividends may be disguised as salaryand channeled out of the corporation tax-free. Because of the potential foravoiding taxation in this manner, “special scrutiny should be given to compen sation paid by a corporation whose stock is closely held.” Pepsi-Cola Bottling , 528 F.2d at 179; see also Treas. Reg. § 1.162-7(b)(1) (noting that “[a]n oste nsible salary paid by a corporation may be a distribution of a dividend on stock,” particularly “in the case of a corporation having few shareholders, prac tically all of whom draw salaries”). The requirement that compensation be i n a reasonable amount and for services actually rendered ensures that a corporati on may not improperly lessen its tax burden by characterizing earnings distribut ions as salary. In assessing whether an expense was reasonable unde r § 162(a)(1), this Court employs the traditional multi-factor test of reasonableness outlined in Pepsi-Cola Bottling , 528 F.2d at 179. When determining the reasonable ness of a salary, “[t]he situation must be considered as a wh ole, with no one factor being decisive.” Id. The factors to be considered have been “stated in numerable- 8 -

times” but never reduced to a definitive list. Id. (listing nine factors used to determine reasonableness of compensation); see also Owensby & Kritikos, Inc. v.
Comm’r , 819 F.2d 1315, 1323 (5th Cir. 1987) (applying a t est consisting of eight factors); Elliotts, Inc. v. Comm’r , 716 F.2d 1241, 1245 (9th Cir. 1983) (applying a test consisting of five broad categories of factors); Mayson Mfg. Co. v.
Comm’r , 178 F.2d 115, 119 (6th Cir. 1949) (applying a tes t consisting of nine factors); Foos v. Comm’r , 41 T.C.M. (CCH) 863, 878–79 (1981) (applying a te st consisting of twenty-one factors); Treas. Reg. § 1.162-7(b)(3) (stating that salaries are deductible in an amount that is “reaso nable under all the circumstances”). Relying primarily on what it could discern from th e testimony of the parties’ experts, the Tax Court examined twelve fac tors to determine reasonableness: (1) The employee’s qualifications; (2) the nature and scope of the employee’s work; (3) the size and complexity of the business; (4) general economic conditions; (5) the employer’s financial condition; (6) a comparison of salaries paid with s ales and net income; (7) distributions to shareholders and retai ned earnings; (8) whether the employee and employer dealt at arm’ s length, and if not, whether an independent investor would have app roved the compensation; (9) the employer’s compensation polic y for all employees; (10) the prevailing rate of compensation for comparable positions in comparable companies; (11) compensatio n paid in prior years; and (12) whether the employee guaranteed the employer’s debt. Eberl’s Claim Serv. , slip mem. at 14–15 (citations omitted).- 9 -

The Tax Court weighed the evidence in light of thos e factors and concluded taxpayer had not carried its burden of sh owing Eberl’s compensation was reasonable. Taxpayer challenges the court’s re solution of several individual components of the multi-factor test as well as its ultimate determination of what level of compensation would have been reasonable. Because substantial evidence supported the findings and ultimate determination o f the Tax Court, we conclude its decision was not clearly erroneous. 1. Compensation In Prior Years Citing an arrangement that allegedly provided for annual compensation of twenty to twenty-five percent of gross receipts, taxpayer asserts that Eberl’s spiked salary in 1992 and 1993 did not represent a significantly higher proportion of gross receipts than in prior years. According t o taxpayer, the alleged contingent compensation arrangement should have bee n viewed as evidence that his salary was reasonable. In Pepsi-Cola Bottling , the taxpayer contended “that a compensation arrangement does not lose its good faith character because its automatic operation in later years under favorable circumstances result s in high compensation,” 528 F.2d at 181, and cited a Treasury regulation genera lly approving the deduction of salaries paid pursuant to contingent compensation arrangements, see Treas. Reg. § 1.162-7(b)(2). Holding that the Tax Court proper ly declined to adopt the2 As taxpayer acknowledges, “there was no formal wr itten documentation

of such formula,” and the Tax Court did not find th at such an arrangement existed, written or unwritten. (Appellant’s Br. at48.) No contingent compensation formula was mentioned in Eberl’s writt en employment agreement or in the minutes of taxpayer’s annual board meetings, at which Eberl set the amount of his compensation. Mark Lehrner, taxpayer’s CPA, testified that “[t]here was never an actual, definitive—actual 20 percent formu la.” (I Trial Tr. at 82.) - 10 - taxpayer’s logic in that case, we noted that “the p remise of the [Treasury] regulation is a free bargain made solely for the pu rpose of securing the services of the employee.” Pepsi-Cola Bottling , 528 F.2d at 181; see also Elliotts , 716 F.2d at 1247 (holding that only a longstanding, con sistently applied compensation plan negotiated at arm’s length is evi dence of reasonableness). In the case on appeal, as in Pepsi-Cola Bottling , a longstanding, consistently applied plan negotiated at arm’s lengt h “is not actually present, since the arrangement was in substance an agreement betwe en [Eberl], acting as the predominant shareholder of the company, and [him]se lf, acting as an individual employee.” 2 528 F.2d at 181. This Court has treated contingent compensation sche mes as inherently suspect in cases like this one: Indeed, the reason for the scrutiny of contingent c ompensation arrangements in close corporations is the suspicion that deductible salary expenses are a disguise for non-deductible p rofit distributions. . . . The non-payment of a dividendin conjunction with a contingent compensation scheme for a control ling shareholder has frequently been recognized as an indication that unreasonable and excessive compensation is being paid.3 As the table above shows, Eberl’s salary as a per centage of gross receipts

varied from as low as 8.7% to as high as 22.7%.

4 “A bonus contract that might be reasonable if exe cuted with an executive who is not a controlling shareholder may be viewed as unreasonable if made with a controlling shareholder, since incentive to the s tockholder to call forth his best effort would not be needed.” Pepsi-Cola Bottling , 528 F.2d at 182. - 11 - Id. at 182–83 (citations omitted). Moreover, if there was a contingent compensation ar rangement, it was not consistently applied: Eberl determined the level o f his salary at the end of each year, when taxpayer’s gross receipts and overhead w ere known, enabling him to “receive virtually all of [taxpayer’s] net profits as compensation.” 3 Eberl’s Claim
Serv. , slip mem. at 22; see also Golden Constr. Co. v. Comm’r , 228 F.2d 637, 639 & n.1 (10th Cir. 1955) (holding that a salary p aid to a president and principal shareholder was unreasonable when he set his own sa lary at the end of the year). Whether or not a formula was used, Eberl’s salary d epleted taxpayer of almost all of its value and was plausibly viewed as unreasonable on that ground alone. 4
2. General Economic Conditions Taxpayer argues that the factor designated as “gene ral economic conditions” was incorrectly resolved in the Commiss ioner’s favor. (Appellant’s Br. at 53.) While taxpayer attributes its dramatic ally increased revenues in 1992 and 1993 to Eberl’s effectiveness as a manager and marketer, the Tax Court correctly observed that the company “benefited [sic ] tremendously from the large- 12 -

amount of catastrophes (5 of the 10 largest in hist ory) during its fiscal years 1992 and 1993.” Eberl’s Claim Serv. , slip mem. at 19. As the Commissioner points out, taxpayer had its largest gross receipts in the same year as the nation’s most costly catastrophe, Hurricane Andrew. Although Carey, the Commissioner’s expert, conclude d in his report that general economic conditions were neutral indicators of reasonableness, it was not clear error for the Tax Court to take a different view in light of the evidence. See Pepsi-Cola Bottling , 528 F.2d at 180–81 (concluding the Tax Court may disregard even the persuasive evidence of expert wi tnesses and draw inferences from other evidence). Moreover, Carey changed his assessment of this factor to a “minor negative” after viewing a stipulation concer ning catastrophic losses from 1971 through 1995. (II Trial Tr. at 379.) For his part, taxpayer’s expert, Albert S. Williams, addressed economic conditions only by noting that “[r]evenues were directly correlated to [Eberl’s] marketing efforts and results, the need for services, i.e., catastrophes , and the ability to provide the service.” (Pet’r’ s Ex. 49 at 3 (emphasis added).) The Tax Court emphasized that general economic co nditions are relevant only as far as they help to discern “the extent of the employee’s effect on the company.” Eberl’s Claim Serv. , slip mem. at 18; see also Alpha Med., Inc. v.
Comm’r , 172 F.3d 942, 948 (6th Cir. 1999) (“Examining eco nomic conditions5 In fiscal year 1992, Eberl’s compensation was 99. 5% of taxpayer’s net

income before deduction for taxes, net operating lo sses, and compensation. In fiscal year 1993, that number was 98%. - 13 - during the tax years in question helps to determine whether the success of a business is attributable to general economic condit ions as opposed to the efforts and business acumen of the employees.”). It was no t clear error for the Tax Court to determine that taxpayer’s elevated receipt s in 1992 and 1993 were a product primarily of an expanded market for its services and only secondarily of “the efforts by Kirk Eberl to position [taxpayer]” to take advantage of that market. (Appellant’s Br. at 54.) 3. Compensation of Other Employees Taxpayer’s contention that its generous compensatio n of its independent adjusters should have weighed in its favor is uncon vincing. As the Tax Court correctly recognized, taxpayer’s “payment policy fo r its adjusters is not similar to [taxpayer’s] payment policy for Eberl” because the adjusters were independent contractors who received a flat-rate commission fiv e to ten percent above the industry norm while Eberl’s “salary” amounted to a year-end distribution of net income. 5 Eberl’s Claim Serv. , slip mem. at 27. Taxpayer’s attempt to contrast the independent adju sters’ situation to Eberl’s betrays the weakness of its position. By arguing that “[t]he independent contractors took absolutely no risk and therefore w ould not deserve to share in- 14 -

the company’s profits ,” taxpayer all but admits that Eberl’s large salary was not compensation for services, but a disguised distribu tion of profits—undoubtedly a reward for the risk he bore, but a reward in the nature of a taxable return on his investment. (Appellant’s Br. at 56 (emphasis added); see also id. (“Nor would it have been sensible for [taxpayer] to use a compensation plan that shared [its] profits with its independent contractors as the Tax Court appeared to suggest.” (emphasis added)).) In his opening statement at trial, the Commission er’s counsel stated [Eberl] deserves the millions of dollars that he re ceived from [taxpayer] during the years at issue.

. . . [T]here’s no question here that [taxpayer] has the right to pay whatever it wants to Mr. Eberl. The only question here, of course, is whether or not the company may deduct the amounts p aid. (I Trial Tr. at 6–7.) Perhaps persuaded by the Com missioner’s argument that a company’s “owner and shareholder [would] ordinarily reap the benefits” of an extraordinarily profitable year, not its employees, the Tax Court properly concluded that Eberl’s salary was in fact a constru ctive dividend on which the company should have paid taxes. ( Id. at 14.) 4. Financial Condition Noting that as taxpayer’s revenues rose over the ye ars, its profits remained relatively “tiny” and its retained earnings and tax able income stagnated, the court found taxpayer’s financial condition favored the Commissioner. Eberl’s Claim- 15 -

Serv. , slip mem. at 19–20. In its objection to the treatment of this factor, taxpayer argues that the Tax Court erroneously reli ed on surveys comparing taxpayer to companies not similarly situated. Taxpayer advances a different scenario for our cons ideration. In its briefs, taxpayer points to its expert’s testimony that the amounts paid to Eberl in 1992 and 1993 were reasonable, in which he compared Eber l to fifty of “the most highly compensated” insurance company chief executi ves as summarized in a Forbes magazine survey, while acknowledging that in the survey “we still do not have anyone that’s in the claims adjusting field, a s near as I can tell.” (II Trial Tr. at 314, 315.) It was entirely proper for the T ax Court to reject the comparison between the companies on the Forbes list , which are probably “the very largest companies in the country” and some of whose CEOs are “way off the board in terms of compensation,” and Eberl’s relati vely small, nonpublic company. ( Id. at 324, 315.) The Commissioner’s expert, on the other hand, testi fied that “bottom line net profit” is the principal measure of a company’s performance and supplied a survey of pretax profits of comparable service companies. ( Id. at 390.) Given the disparity, it was not improper for the Tax Court to reject the testimony of one expert and rely on that of another. See Pepsi-Cola Bottling , 528 F.2d at 181 (holding the “credibility of witnesses, the weight of the evidence, and the- 16 -

reasonable inferences to be drawn therefrom are forthe Tax Court to determine”). 5. Evidence Used to Determine a Reasonable Amount of Compensation Similarly, the Tax Court properly relied on expert testimony when it determined the specific amounts that would have con stituted reasonable compensation in 1992 and 1993. Based on Carey’s testimony that successful service companies comparable to taxpayer had pretax profits of ten percent of sa les during the years in question, the court estimated that reasonable amounts of reta ined earnings would have been $2 million and $1 million, respectively, for fiscal years 1992 and 1993. According to those figures, reasonable compensation of Eberl would have been $2,340,000 and $1,080,000 in those two years. Taxp ayer asserts that this amounted to the use of an “unprecedented hypothetic al retained earnings test” rather than an analysis of the circumstances as a w hole as required by our precedent. (Appellant’s Br. at 42.) To the contrary, we conclude the court determined in light of all the evidence that Eberl’ s salary was unreasonably large, then relied on Carey’s evidence of reasonable retai ned earnings to fix a reasonable amount. While it is true that the court rejected some of Carey’s data as invalid, taxpayer’s contention that his data on imputed pret ax profits were thereby- 17 -

discredited is without merit. Carey relied on two different surveys to determine comparable salaries and typical pretax profits, and the Tax Court permissibly determined the latter included comparable companies while the former did not.
See Pepsi-Cola Bottling , 528 F.2d at 181.

B. The Independent Investor Test In an argument raised for the first time on appeal, taxpayer asks this Court to adopt a new approach when determining reasonable ness of compensation under I.R.C. § 162(a)(1). Taxpayer asserts that wh ile a multi-factor test of reasonableness has been employed in this Circuit in the past, “this Court has not expressly embraced such a test.” (Appellant’s Br. at 25.) It argues that this Court’s opinion in Pepsi-Cola Bottling endorsed only the proposition that “the determination of reasonable compensation is based o n the totality of the circumstances” but did not preclude future panels f rom revisiting the content of the reasonableness test. ( Id. ) Specifically, taxpayer cites a recent “trend” in ot her Circuits toward the use of an “independent investor” test. ( Id. at 26 (citing Exacto Spring Corp. v.
Comm’r , 196 F.3d 833, 838 (7th Cir. 1999) (rejecting a mu lti-factor approach to determining reasonableness of a salary and adopting an “independent investor” test); Dexsil Corp. v. Comm’r , 147 F.3d 96, 100–01 (2d Cir. 1998) (applying an independent investor test and noting the test “is n ot a separate autonomous- 18 -

factor; rather, it provides a lens through which th e entire analysis should be viewed”); Rapco, Inc. v. Comm’r , 85 F.3d 950, 954–55 (2d Cir. 1996) (applying a multi-factor test “from the perspective of an independent investor”); Elliotts , 716 F.2d at 1245 (same).). We are urged to follow suit by setting aside the traditional multi-factor test of reasonable compens ation in favor of some form of the independent investor test recently adopted by s ome of our sister Circuits. The independent investor test approaches the issue of reasonableness by asking “whether an inactive, independent investor w ould be willing to compensate the employee as he was compensated.” Elliotts , 716 F.2d at 1245; see also Exacto Spring , 196 F.3d at 839 (“When, notwithstanding the CEO’s ‘exorbitant’ salary . . . the investors in his comp any are obtaining a far higher return than they had any reason to expect, his salary is presumptively reasonable.”). In other words, a salary is entitle d to a rebuttable presumption of reasonableness when a hypothetical outside investorin the company would earn a desirable rate of return. See Exacto Spring , 196 F.3d at 838 (“If the rate of return is extremely high, it will be difficult to p rove that the manager is being overpaid, for [replacing the manager with a lower-p aid manager] . . . would be killing the goose that lays the golden egg.”). The independent investor test is an attractive solution because it is “much simpler andmore purposive” than the6 Further, of those Circuits that have embraced an independent investor

test, only the Seventh has gone so far as to jettis on the multi-factor approach entirely. Others have merely committed to viewing the totality of the circumstances through the “lens” of, Dexsil Corp. , 147 F.3d at 101, or “from the perspective of,” Elliotts , 716 F.2d at 1245, a hypothetical outside investor . Those Circuits have retained the totality of the circumst ances approach that this Court embraced in Pepsi-Cola Bottling

. - 19 - multi-factor approach, “return[ing] the inquiry to basics” by focusing on the disinterested investor’s perspective. Id. Somewhat disingenuously, taxpayer argues that in Pepsi-Cola Bottling , “at no time did the Court state . . . that a multi-fact or test was the proper method for assessing reasonable compensation.” (Appellant’s B r. at 26 n.4.) To the contrary, Pepsi-Cola Bottling establishes that this Court assesses reasonablenes s of compensation using a multi-factor test. 528 F.2 d at 179. Whatever the relative wisdom of the two approaches, absent en banc rehearing we are bound to the use of a multi-factor approach by our prior decision in Pepsi-Cola Bottling

. 6- 20 - III Taxpayer compensated Eberl “at a level that deplete d it of virtually all of its profits.” (Appellee’s Br. at 25.) The Tax Cou rt properly found that a large portion of Eberl’s compensation was in fact a disgu ised dividend and should be taxed as such. Considering the record as a whole, we cannot say that the Tax Court’s findings were clearly erroneous. The decis ion of the Tax Court is
AFFIRMED

.