Family business compensation found not reasonable. Businesses can deduct ordinary and necessary expenses, including reasonable compensation. In one case, the U.S. Tax Court redetermined a corporation’s salary deductions for amounts paid to the founder’s four sons who were officer-employees. Reasons the court found the amounts too high include: The sons had no special experience or educational background and the father paid them equal salaries. The court noted that “compensation in closely held businesses is subject to close scrutiny.” (TC Memo 2016-216)
