Tax Memo #2-Executive Compensation

assume that 2007 is a typical year for KimTech, in wrong of positivity and wages practices, evaluate the liableness of Kims wages bundle in light of the atomic number 23 factors enumerated in the Elliotts case. If audited by the IRS, leave alone Kims allowance be deemed logical? why or why not? What can KimTech do to represent that Kims pay is reasonable? The louvre factors under Elliotts case be (1) the employees role in the attach to; (2) a comparison of the employees hire with those paid by similar companies for similar services; (3) the calibre and particularise of the family; (4) potential competitivenesss of interest; (5) evidence of an internal repugnance in a companys treatment of payments to employees. http://ftp.resource.org/courts.gov/c/F3/221/221.F3d.1091.99-70164.html If audited by the IRS I think Mr. Kims requital would be deemed unreasonable. By using the five factors under Elliots case I determined the following (1) dilut e due to lack of information (2)Mr. Kim detects twice as oftentimes compensation compared to early(a) CEOs in the same attention (3)The condition of the company is profitable (4)Mr.

Kim as a commanding shareholder could come in a potential conflict of interest (5)The two other officers of company did not receive a bonus and there is no mention of a bonus system Based on these facts the IRS has no superior but to deem Mr. Kims compensation as unreasonable. The lonesome(prenominal) way to prove that Mr. Kims compensation was justified is to evidence that Mr. King is an invaluable employee of the compan y and as such he works longer and harder tha! n any other officer of the company. Assuming that 2007 is a typical year for KimTech, in terms of profitability and compensation practices, evaluate the reasonableness of Kims compensation using the breakaway investor/return on equity approach. Is Kims compensation package reasonable under this test? Why or why not? Under the Independent Investor Approach...If you want to come up a full essay, order it on our website: OrderCustomPaper.com

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