Compensation paid to corporate employees


Problem: Whether compensation paid to a corporate employees is reasonable is a question of fact to be determined from the surrounding circumstances. How would the resolutions of this problem be affected by each of the following factors?

a. The employee owns no stock but is the mother in law of the sole shareholder.

b. The shareholder-employee does not have a college degree.

c. The shareholder-employer works 40 hours per week for another unrelated employer.

d. The shareholder-employee was underpaid for services during the formative period of the corporation.

e. The corporation has never paid dividend.

f. Year-end bonuses are paid to all employees, but officer-shareholders receive disproportionately larger bonuses.

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Accounting Basics: Compensation paid to corporate employees
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