Reasonable compensation is a fact based analysis, and once again has been decided against the taxpayer. In Transupport, Inc. v Commissioner, T.C. Memo. 2016-216, the issue presented for decision was whether amounts deducted by the taxpayer, a distributor and supplier of aircraft engines and parts, during 2006‒2008 as compensation that was paid to the four sons of taxpayer’s president and majority shareholder were reasonable and deductible pursuant to Internal Revenue Code (IRC) Section 162 and whether accuracy related penalties applied. In 2005, the president and 98-percent owner of Transupport, gifted and sold shares in equal percentages to his four sons. The president and his four sons were the sole employees and officers for the tax years at issue. The president determined the compensation payable to his sons without consultation with his accountant or anyone else, and the only factors considered were reduction of reported taxable income, equal treatment of each son and share ownership. (more…)