Welcome to my new Blog on reasonable compensation. The primary focus will be on owner-employees from the standpoint of what constitutes reasonable compensation in a number of different contexts, including:
- normalization adjustments for owner-employee compensation and benefits;
- reasonable compensation in the context of economic damage assessments;
- reasonable and supportable compensation determinations in tax controversy work including C and S corporation IRS examinations; and
- for use in management and enterprise planning.
I will highlight and expand on many of the concepts and case law summaries incorporated into my book, Reasonable Compensation: Analysis and Models for Appraisal, Tax and Management. This book was published in late 2010 and is co-authored by Kevin Yeanoplos and available from Business Valuation Resources (www.bveresources.com). More information is available on our cpavalue.com website as well.
I intend to post insights and comments on the resources I maintain, as well as things I have access to that are often useful in the work I do in this area. For example, I have recently undertaken some continuing education on the resources available from Kenexa, formerly Salary.com on the use and application of their growing database and accompanying resources. This is a source I was originally quite critical of due to a lack of information on the data one could often get for free from their website. This company appears to be evolving to meet the needs of practitioners like us that can only utilize data of this type after getting a certain acceptable level of comfort on the source of the data made available. To expand on this point a bit, if one cannot determine the aging of underlying data and the integrity of how it was collected, the resulting statistics are often of little use. This is an area where I will have plenty of on-going discussion as future blog posts are made.
I will be providing comments on specific industries and how ownership, management and those that advise these businesses can find information to help them make the best decisions possible in their particular niche or industry segment. Case law will be covered as well with discussion on some of the older landmark cases and the guidance to be taken from them, as well as providing comment on more recent decisions.
Comments are always welcome and I look forward to sharing many more thoughts with you in the immediate future.