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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(Un)reasonable Fees Paid by Qualified Retirement Plans
Under Internal Revenue Code section 404(c), plan sponsors have fiduciary responsibilities to protect the interests of the participants. Among these responsibilities is an obligation to ensure that fees charged to participants’ accounts are reasonable. This includes fees charged by investment managers, auditors, attorneys, advisors, and others. In recent years, high-profile lawsuits were filed against plan…
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Shareholder Disputes at Closely Held Businesses
Over the last twenty years, an increasing number of attorneys have contacted me about litigation among shareholders of closely held businesses. Shareholders of closely held businesses in various parts of the United States are embroiled in litigation with each other over the amount of compensation that one or more of the shareholder-officers received. These lawsuits…
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