Eye Doctor's Compensation Not Reasonable.

The petitioner, a C corporation that employed an eye doctor who also owned the C corporation, paid a $2,000,000 bonus to the eye doctor in 2007.  The payment of the bonus by the C corporation had the effect of eliminating corporate income, taxable at a 35 percent rate.  The petitioner also carried over an NOL from 2007 to 2008.  The IRS argued for a reduced bonus on the basis that $2,000,000 was not reasonable under the facts.  The court agreed with the IRS on the basis that the C corporation provided no methodology as to how the doctor's bonus was computed.  The court deemed $1 million of the bonus payment to be "excessive compensation" taxed at 32 percent.   The court also upheld the IRS determination of penalties in the amount of $62,000.  Midwest Eye Center, S.C. v. Comr., T.C. Memo. 2015-53.

CALT does not provide legal advice. Any information provided on this website is not intended to be a substitute for legal services from a competent professional. CALT's work is supported by fee-based seminars and generous private gifts. Any opinions, findings, conclusions or recommendations expressed in the material contained on this website do not necessarily reflect the views of Iowa State University.

RSS​ Facebook Twitter