The watchful eyes of the IRS – Tread carefully when setting owner compensation

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Abstract: Dealership owners would like to reward themselves and their partners with attractive compensation when business is good. But they must be careful: The IRS is watching to make sure compensation levels are “reasonable,” and it pays particular attention to the dealership’s business structure. This article describes considerations for C corporations, the popular S corporation and others. It also points out IRS “red flags.”