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http://ssrn.com/abstract=254928
 
 

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Reasonable Compensation


Edward A. Zelinsky


Yeshiva University - Benjamin N. Cardozo School of Law


58th Institute on Federal Taxation

Abstract:     
The doctrine of reasonable compensation is an anachronism which Congress should repeal. The doctrine is today incoherent as a matter of policy and unfair as a matter of practice. While the rule that corporations can only deduct reasonable compensation may have made sense in an earlier age confident about the propriety of double taxing corporate earnings, that rule has now been overtaken by intellectual and practical developments: the current federal policy that closely-held business income need not be taxed twice; broader intellectual skepticism about the propriety of double taxation even as to publicly-traded corporations; the emergence of an economy in which payments to those controlling publicly-held corporations have reached levels previously unimagined and in which significant dividends are increasingly rare. At its most basic, the reasonable compensation doctrine has become little more than a selectively-imposed penalty on entrepreneurial success, lacking any persuasive policy justification.

Number of Pages in PDF File: 26

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Date posted: January 23, 2001  

Suggested Citation

Zelinsky, Edward A., Reasonable Compensation. 58th Institute on Federal Taxation. Available at SSRN: http://ssrn.com/abstract=254928 or http://dx.doi.org/10.2139/ssrn.254928

Contact Information

Edward A. Zelinsky (Contact Author)
Yeshiva University - Benjamin N. Cardozo School of Law ( email )
55 Fifth Ave.
New York, NY 10003
United States
212-790-0277 (Phone)
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