By Stephen D. Kirkland, CPA, CMC, CFF Yes, according to some published Tax Court cases, including Choate Construction Company, T.C. Memo. 1997-495. My report and courtroom testimony highlighted the fact that the founder had worked for minimal pay in the first years of the business. In his published opinion, Judge John Colvin (who later became…
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Professional and Enterprise Goodwill
An incredible amount of value can be derived from a single idea or a single relationship. Relationships can be powerful in industries where owners have regular contact with customers, referral sources, suppliers and/or employees. The owners may have many good relationships and have outstanding reputations in their industries. These relationships and reputations are valuable intangibles…
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Does Lack of Dividends Equate to Disguised Dividends?
In analyzing whether a C corporation’s payments to shareholder-employees were compensation or “disguised” dividends, the Internal Revenue Service and courts consider whether dividends were paid by the corporations. The Regulations say it is “likely” that a compensation payment is in fact a dividend distribution when excessive payments correspond to or bear a close relationship to…
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How do Long-Term Incentives affect Executive Compensation Amounts?
Appreciation in a company’s stock value can be one reason that executive compensation amounts appear to be so high. Publicly-traded companies are required by the Securities and Exchange Commission ("SEC") to disclose how much their top executives were paid the prior year. Companies usually publish this data in the proxy that is sent to shareholders soon…
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