Owner compensation: What’s reasonable?

Description

Abstract: Controlling owners of closely held construction companies are generally free to set their own salaries and bonuses. But, under certain circumstances, the reasonableness of owner compensation can become an issue. This article examines a U.S. Tax Court case that outlines five factors to consider in determining whether a corporate shareholder/employee’s compensation is reasonable. Multi-Pak Corp. v. Commissioner (T.C. Memo 2010-139)