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Recharacterization Of Unreasonable Compensation: An Equitable Mandate, Barbara F. Sikon

Cleveland State Law Review

This note identifies the inequities inherent in the failure to recharacterize unreasonable compensation payments and proposes that the taxpayer be allowed to present evidence of an alternative characterization after the government determines a reasonable allowance. Part I of this note demonstrates the historical applications of section 162 supporting a purpose of challenging payments disguised as compensation with an accompanying tax advantage. It will explore the legislative history and statutory implications, as well as applications in case law. Part II explains the highly subjective character of the determination of reasonableness and explores the numerous dimensions of that judgment. Part III explains …