- 11 - Heitz v. Commissioner, T.C. Memo. 1998-220. These factors include, but are not limited to: (1) Employee qualifications; (2) the nature, extent, and scope of the employee’s work; (3) the size and complexity of the business; (4) prevailing general economic conditions; (5) the employee’s compensation as a percentage of gross and net income; (6) the employee- shareholders’ compensation compared with distributions to shareholders; (7) the employee-shareholders’ compensation compared with that paid to non-shareholder-employees or paid in prior years; (8) prevailing rates of compensation for comparable positions in comparable concerns; and (9) comparison of compensation paid to a particular shareholder-employee in previous years where the corporation has a limited number of officers. The Court of Appeals for the Eighth Circuit has not applied the independent investor test, but in Wagner Constr., Inc. v. Commissioner, T.C. Memo. 2001-160, which would have been appealable to the Court of Appeals for the Eighth Circuit, we applied the independent investor test as a lens through which we view each factor. See also Haffner’s Serv. Stations, Inc. v. Commissioner, T.C. Memo. 2002-38, affd. 326 F.3d 1 (1st Cir. 2003). In general, this test questions whether an inactive, independent investor would have been willing to pay the amount of disputed compensation on the basis of the facts of eachPage: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011