Unreasonable Compensation
Unreasonable Compensation means:
owner-employee compensation disallowed as excessive by a revenue agent and reclassified as a disguised dividend in a closely-held corporation setting. Since dividends are not deductible and salaries are, there is an incentive to pay inflated compensation to an employee-owner to obtain a tax shield.
See Dividend in the American Legal Encyclopedia and Dividend in the World Legal Encyclopedia.
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