Tax Memo #2-Executive Compensation

assume that 2007 is a typical year for KimTech, in hurt of profitability 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 liable? why or why not? What can KimTech do to press out that Kims pay is reasonable? The quintuple factors under Elliotts case be (1) the employees role in the attach to; (2) a comparison of the employees allowance with those paid by similar companies for similar services; (3) the part and particularise of the family; (4) potential contraventions of interest; (5) evidence of an internal unlikeness 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) t hin due to lack of information (2)Mr. Kim starts twice as ofttimes compensation compared to early(a) CEOs in the same sedulousness (3)The condition of the company is profitable (4)Mr.

Kim as a imperious 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 picking but to deem Mr. Kims compensation as unreasonable. The single way to prove that Mr. Kims compensation was justified is to project that Mr. King is an invaluable employee of the company and as such h e works longer and harder than any other off! icer 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 item-by-item 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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