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RESEARCH MEMO Our new client is President and sole shareholder of Techstar Inc. a small...

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Accounting

RESEARCH MEMO
Our new client is President and sole shareholder of Techstar Inc. a small but rapidly
growing C Corporation that manufactures and sells electronic components. The
President's compensation for the current year is $1,250,000, which includes both
salary and bonuses. I am concerned that if the IRS where to audit Techstar Inc. that
they would raise the issue of unreasonable compensation for the President. Please
submit to me a well thought out memo (3 to 5 pages) on the following:
How might the IRS claim that a portion of the President's compensation is
unreasonable?
What specifically could we suggest to help our client mitigate the potential
unreasonable compensation issue raised by the government?
NOTE: You may use any and all materials including but not limited to, the textbook, RIA
Checkpoint, the IRS website, IRS Code and REGS., Case law
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