Kimtech Tax Memo

The first replication is that the soundness of Kims remunerate softw are production is to be evaluated in the light of the fiver factors enumerated in the Elliots case. The issue is result IRS evaluate Kims compensation to be reasonable and if Kims compensation package is reasonable under the test. The relevant case equity is Elliotts, Inc. v. Commissioner (1983) that is employ to ascertain reasonable compensation under role 162(a)(1). The five factors are employees role in the play along, international com comparisonisons, character and take of the smart set, conflict of interest, and internal consistency. IRS lead not deem Kims compensation to be reasonable. The reason is that his concentrate alone is 80% of the companys earning. Moreover, he has an additional fixed payment of $100,000. This yields his compensation equal to 90% of the net pretax compensation. The IRS will comprehend the high compensation as an attempt to avoid stipendiary taxes. Howev er, Kim can defend himself utilise the five factors complete in Elliotts case. With respect to employees role in the company, 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 stance earn $500,000, however, since he has through with(p) the work of several persons by putting in otiose effort, extra endeavors, and extra hours he should be suitably equilibrise for his toils. With regards to the character and condition of the company, Kim inescapably to provide support about the financial and business str ength of the company, and that the company i! s playacting 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 pay the compensation that Kim is receiving...If you want to admit a full essay, regularize it on our website: OrderEssay.net

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