The IRS is increasing enforcement action with respect to shareholder compensation at S Corps. And challenges to compensation amounts have become more common in shareholder litigation, business valuations, family court, discrimination cases, and other types of disputes.

This session will explore how to determine a defensible compensation amount for litigation or tax authority examination, and how to know when amounts are unreasonably high or low. We will explain the commonly accepted approaches and evaluate data sets that are used as compensation comparability data.

Defending reasonable compensation for closely held SMBs can be a lucrative specialty niche for practitioners growing their advisory service offerings. For advisors already engaged in valuation and tax resolution, knowing how to defend your reasonable compensation recommendation can keep you from getting blindsided on the witness stand and arm you with expert knowledge that will help you determine the credibility of the opposing side’s compensation figure, and how to discredit it when appropriate.

Learning Objectives:

• Review the cost, market, and income approaches for determining reasonable compensation


• Evaluate compensation surveys and data sets for credibility


• Identify how to use software to extract appropriate pay amounts from benchmarking data


• Determine how professional judgment and defensible assumptions can support an opinion


• List steps involved in preparing to defend your position in court or an IRS examination


• Give examples of actual case studies and tips from an experienced expert witness