What are the major decisions in the Reasonable Compensation area and the lessons learned from them?

The major cases you should be aware of when it comes to reasonable compensation include:
– Sean McAlary Ltd, Inc. v. Commissioner (2013) – The McAlary case centered around Mr. McAlary, a shareholder of a real estate company, who took significant profit distributions without paying himself any salary. The IRS determined a salary based upon the profit of the company, and the court disagreed with both parties. Salary has nothing to do with profit but the services provided and either its market value or its replacement cost.
– Glass Blocks Unlimited v. Commissioner (2013) – If the shareholder is going to claim that amounts are loans and not compensation then it should have been documented like a loan with a note and interest payable, and treated like a loan with interest payments, etc.
– David E. Watson, P.C. v. United States (2010) – Mr. Watson set his salary after a \”negotiation between the board (himself) and the employee (himself), and his position was that he had determined what his salary should be and the IRS didn\’t have the right to change it. The IRS, and ultimately the Court, disagreed.
– Davis vs. US (1994) – Husband of the owner was President in name only but did not provide any services to the company his wife ran, and in fact had a full-time job with another company. The IRS lost this case, with the court deciding that you only need to take compensation if you actually provide services.