Archived

Archived

no-tax-court-for-reasonable-compensation-re-characterization-lg

No Tax Court for Reasonable Compensation Re-Characterization

In a recent memorandum to its agents and examiners, the IRS lays out steps to keep Reasonable Compensation challenges out of Tax Court.  Great, you say, nobody wants to go to court! Not so fast. The option of filing a petition in Tax Court provides taxpayers with time and leverage. By following the steps in this memo, …

No Tax Court for Reasonable Compensation Re-Characterization Read More »

three-methods-of-determining-reasonable-compensation-part-iii-the-income-approach-lg

Three Methods of Determining Reasonable Compensation Part III: The Income Approach

There are three generally accepted methods for determining Reasonable Compensation for the owner of a closely-held business. It is important to match each method with the business’s size and the business owner’s job duties. The Cost approach, aka many hats, approach: Generally works best for small businesses where the owner wears multiple hats. The Market …

Three Methods of Determining Reasonable Compensation Part III: The Income Approach Read More »

three-methods-of-determining-reasonable-compensation-part-ii-the-market-approach-lg

Three Methods of Determining Reasonable Compensation Part II: The Market Approach

There are three generally accepted methods for determining Reasonable Compensation for the owner of a closely-held business. It is important to match each method with the business’s size and business owner’s job duties. The Cost approach, aka many hats, approach: Generally works best for small businesses where the owner wears multiple hats. The Market approach, …

Three Methods of Determining Reasonable Compensation Part II: The Market Approach Read More »

three-methods-of-determining-reasonable-compensation-part-i-the-cost-approach-lg

Three Methods of Determining Reasonable Compensation Part I: The Cost Approach

There are three generally accepted methods for determining reasonable compensation for the owner of a closely-held business. It is important to match each method with the business’s size and business owner’s job duties. The Cost approach, aka many hats, approach: Generally works best for small businesses where the owner wears multiple hats. The Market approach, aka …

Three Methods of Determining Reasonable Compensation Part I: The Cost Approach Read More »

the-relationship-between-reasonable-compensation-and-business-valuation-2-lg

The Relationship Between Reasonable Compensation and Business Valuation

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, …

The Relationship Between Reasonable Compensation and Business Valuation Read More »

how-an-s-corp-can-lose-money-and-still-be-required-to-pay-reasonable-compensation-lg

How an S Corp can Lose Money and Still be Required to Pay Reasonable Compensation

This scenario is possible because Reasonable Compensation is not tied to Profit or Loss but to Distributions.   The IRS guidelines for Reasonable Compensation state: The amount of reasonable compensation will never exceed the amount received by the shareholder either directly or indirectly.  It does not mention profit or loss at all but instead talks about ‘amounts …

How an S Corp can Lose Money and Still be Required to Pay Reasonable Compensation Read More »

reasonable-compensation-and-the-single-shareholder-s-corp-lg

Reasonable Compensation and the Single Shareholder S Corp

“If there is only one shareholder and no other employees, should all distributions be taken out as Reasonable Compensation?” This is a common question we receive at RCReports and like with most of the questions we receive, the answer is: “Maybe.” If the business is so unique or the services of the shareholder are so …

Reasonable Compensation and the Single Shareholder S Corp Read More »

        Submit a Ticket

        Scroll to Top