AN 92(7)

Unreasonable Compensation Of S Corporation Shareholders

The Department of Revenue Services has been studying the issue of the unreasonable compensation of officers and employees of an S corporation. This issue directly affects the corporation business tax liability of the S corporation in that the amount of its net income that is subject to corporation business tax is computed by deducting compensation of its officers and employees.

After careful consideration, the Department of Revenue Services is making known in this Announcement that it does not intend to raise the unreasonable compensation issue in corporation business tax audit examinations of S corporations for taxable years beginning before January 1, 1993. However, the Department may raise the issue in corporation business tax audit examinations of S corporations for taxable years beginning on or after January 1, 1993, irrespective of whether the Internal Revenue Service has raised the issue.

PLEASE NOTE THE FOLLOWING NEW INFORMATION ABOUT DRS.

FOR FURTHER INFORMATION: To order forms and publications or for further information, call the Department of Revenue Services at 860-297-5962 (Hartford area or out-of-state) or 1-800-382-9463 (in-state). Forms and publications may be ordered through voice-mail 24-hours a day by choosing Option 3 on your touch tone telephone.

Electronic Delivery Options: You can also obtain tax forms and publications 24-hours a day from our Website.

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AN 92(7)
Corporation business tax
Issued 12/10/92