Kimtech Tax Memo

The first cut is that the erudition of Kims remunerate softw atomic number 18 production is to be evaluated in the exculpated of the fiver factors enumerated in the Elliots case. The issue is result IRS evaluate Kims hire to be mediocre and if Kims earnings package is liable beneath the test. The relevant case right is Elliotts, Inc. v. Commissioner (1983) that is employ to ascertain reasonable hire under constituent 162(a)(1). The five factors are employees utilisation in the play along, outside(a) comequationisons, character and take of the alacrity set, conflict of interest, and internal consistency. IRS lead not deem Kims compensation to be reasonable. The reason is that his incentive alone is 80% of the ac social clubs earning. Moreover, he has an additional fixed salary of $100,000. This muddles his compensation equal to 90% of the net pretax compensation. The IRS will descry the high compensation as an attempt to avoid stipendiary taxes. However, Kim can defend himself go for the five factors completed in Elliotts case. With respect to employees role in the company, Kim can claim that he is instrumental in pay backting 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 spatial relation earn $500,000, however, since he has make the work of several persons by putting in extra effort, extra endeavors, and extra hours he should be suitably salaried for his toils. With regards to the character and condition of the company, Kim of necessity to provide instigate about the financial and work strength of the company, and that the company is performing 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 deport the compensation that Kim is receiving...If you want to get a full essay, tell it on our website: Ordercustompaper.com

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