Tax Memo #2-Executive Compensation

expect that 2007 is a typical year for KimTech, in foothold of lucrativeness 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 commonsense? why or why not? What can KimTech do to destine that Kims pay is reasonable? The fivesome factors under Elliotts case are (1) the employees role in the attach to; (2) a comparison of the employees payment with those paid by similar companies for similar services; (3) the temper and particularise of the family; (4) potential involvements of interest; (5) evidence of an internal discrimination 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 followin g (1) steal due to lack of information (2)Mr. Kim start outs twice as much compensation compared to early(a) CEOs in the same exertion (3)The condition of the company is profitable (4)Mr.

Kim as a supreme 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 extract but to deem Mr. Kims compensation as unreasonable. The unaccompanied way to prove that Mr. Kims compensation was justified is to order that Mr. King is an invaluable employee of the company and as such he works longer and harder than 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 unaffiliated 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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