7th Circuit Rejects Tax Court's Reasonable Compensation Test

Business Valuation Update BVLaw
Legal and Court Case Update
November 16, 1999
3495 Wire Springs
332216 Saw Blade and Handtool Manufacturing
federal taxation
reasonable compensation, income tax

Exacto Spring v. Commissioner
T.C. Memo 1998-220, 1998 Tax Ct. Memo LEXIS 221
Federal Court
7th Circuit
United States Court of Appeals


The issue in this corporate income tax matter was whether the petitioner's deduction for the salary of its chief executive and principal owner was excessive, as asserted by the IRS.

See Also

Exacto Spring v. Commissioner

At issue is the interpretation of tax law that allows a business to deduct from its income its "ordinary and necessary" business expenses.