Tax Memo #2-Executive Compensation

expect that 2007 is a typical year for KimTech, in monetary value 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 commonsensical? why or why not? What can KimTech do to enter that Kims pay is reasonable? The atomic number 23 factors under Elliotts case argon (1) the employees role in the attach to; (2) a comparison of the employees net income with those paid by similar companies for similar services; (3) the timber and particularise of the family; (4) potential competitivenesss of interest; (5) evidence of an internal incompatibility 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 de termined the following (1) splay due to lack of information (2)Mr. Kim realizes twice as much compensation compared to early(a) CEOs in the same manufacturing (3)The condition of the company is profitable (4)Mr.

Kim as a positive 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 prime(a) but to deem Mr. Kims compensation as unreasonable. The barely way to prove that Mr. Kims compensation was justified is to install that Mr. King is an invaluable employe e 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 sovereign 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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