Beginning with Mayson Manufacturing Co. v. Commissioner, 178 F.2d 115 (6th Cir. 1949), the courts have developed various factors to consider in determining whether compensation amounts were reasonable. Some of the key factors are: · The employee’s qualifications, including education and training, · The nature, extent and scope of the employee’s duties, · The amount…
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Using Compensation Comparability Data
We often need to determine reasonable compensation amounts for executives, attorneys, charity managers, trustees, or retirement plan service providers. This is an important process and should not be taken lightly. At first blush, it is tempting to assume that the market establishes reasonableness. Hence, we often use benchmarking, which involves comparing one person’s pay level 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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Limit on Deductions for Executive Compensation at Public Companies
By Stephen Kirkland This article was published y NACVA in QuickRead on July 11, 2019. The Tax Cuts and Jobs Act (TCJA) made important changes to Section 162(m) of the Internal Revenue Code. That section limits a publicly held corporation’s tax deduction for compensation paid to each covered employee to a maximum of $1,000,000 per year.…
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