Question

Corporation P owns 85 percent of the outstanding stock of Corporation R. This year, employees of Corporation R performed extensive management services for Corporation P. In return for the services, Corporation P paid a $250,000 fee to Corporation R, which Corporation P reported as a deductible business expense.
a. Is the consulting arrangement an arm’s-length transaction?
b. If the IRS challenges the validity of Corporation P’s deduction, what facts might the corporation offer as evidence of the validity of the payment?


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  • CreatedNovember 03, 2015
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