Executives tend to be well paid in corporate America. In response, the media is debating whether these executives are really worth the amounts they are taking home. And, since the answer to that question has dramatic tax consequences, the Internal Revenue Service is paying close attention to this debate. The income tax laws allow corporations to deduct “ordinary and necessary” expenses incurred in carrying on their businesses. This includes compensation for services performed by stockholders and their family members, but only if the amounts paid are “reasonable” for the services performed.
