Kimtech Tax Memo

The first roll in the hay is that the modestness of Kims remunerate softw be overlap is to be evaluated in the well-to-do of the fiver factors enumerated in the Elliots case. The issue is result IRS evaluate Kims wages to be conceivable and if Kims stipend package is commonsensical chthonic the test. The relevant case fair play is Elliotts, Inc. v. Commissioner (1983) that is employ to ascertain reasonable compensation under incision 162(a)(1). The five factors are employees procedure in the play along, out-of-door com comparabilityisons, character and take of the refreshing set, conflict of interest, and internal consistency. IRS impart not deem Kims compensation to be reasonable. The reason is that his motivator alone is 80% of the go withs earning. Moreover, he has an additional fixed wage of $100,000. This dispatchs his compensation equal to 90% of the net pretax compensation. The IRS will encompass the high compensation as an attempt to avoid salaried taxes. However, Kim can defend himself engage the five factors establish in Elliotts case. With respect to employees role in the partnership, Kim can claim that he is instrumental in acquiring all the strain, he has established relationships with customers, and is the pivotal person in the company.

He can make external comparison by showing that person in the industry in his office earn $500,000, however, since he has through with(p) the work of several persons by putting in surplus effort, extra endeavors, and extra hours he should be suitably even up for his toils. With regards to the character and condition of the company, Kim ineluctably to provide comport about the financial and argumentation strength of the company, and that the company is playing exceptionally well because of Kim. He needs to be rewarded for his efforts. With regards to conflict of interest, Kim needs to establish that the operating results of the company are at par with industry standards or are better and that a reasonable investor would be willing to chance the compensation that Kim is receiving...If you want to get a full essay, order it on our website: Orderessay

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