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Three Court Cases that Define the Modern Era of Reasonable Compensation

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The modern era for Reasonable Compensation for S Corps started in 2005 with a study of S Corporation Reporting Compliance.  This study spawned numerous reports that changed and shaped the way IRS examiners address non-compliance on the issues of Reasonable Compensation.  This change can be seen in the differences between Pre-2005 court cases and Post-2005 court …

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Timing S Corp Distributions to keep the IRS off your Back

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When is the proper time to make a distribution of earnings and profits to an S Corporation’s shareholders? “I’ll just take distributions, then pay myself reasonable compensation at the end of the year.” Quack, quack. “Holding a meeting is a hassle. I’ll just write a check for my distribution when I do payroll.” Waddle, waddle. Reasonable …

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Elvis tells the IRS “Don’t Be Cruel”…

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It has been more than 40 years since Elvis Presley faked his own death so that he could become a deserted-island based tax advisor. Back then, the IRS was auditing hundreds of C corporations, looking to see if they were over-compensating their shareholders. Elvis wanted to help. Later, privately-owned C corporations started to become less …

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The Relationship Between Reasonable Compensation and Business Valuation

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A common question in public practice is, “how much is my business worth?” This question comes up for a variety of reasons. It could be a business merger, sale of the business, divorce, death or even idle curiosity. There are a lot of different factors that go into a business valuation. It is an oversimplification, …

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Wiley L. Barron, CPA, LTD. v. Commissioner of Internal Revenue

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T.C. Summary Opinion 2001-10 February 7, 2001 Having become very familiar with the court case, Wiley Barron became easy to talk about, particularly when it came to Sub-Chapter S Corporations and reasonable compensation. Mr. Barron’s office was located in Pine Bluff, Arkansas. His S Corporation, of which he owned 100%, was formed in 1990 and …

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4 (free) Tools that make Reasonable Compensation Compliance a breeze

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Watching the leaves in free fall inspired us at RCReports to put together four free resources for you. All of these tools (and more) are free for RCReports account holders. If Reasonable Compensation has been a tough subject to bring up with your clients, offering these free tools may help you rake in the data you need …

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