The Internal Revenue Manual section 4233.27 lists twelve factors to be
considered by an agent on examination in IRC 162 reasonable compensation cases,
while various courts have developed their own lists. The factors the Manual lists are:
1) the nature of the employee's duties;
2) the employee's background and experience;
3) the employee's knowledge of the business;
4) the size of the business;
5) the employee's contribution to the profit making;
6) the time devoted by the employee to the business;
7) the economic conditions in general and locally;
8) the character and amount of responsibility of the employee;
9) the time of year when compensation is determined;
10) the relationship of shareholder-officer's compensation to stock holdings;
11) whether alleged compensation is in reality, in whole or in part, payment
for a business or assets acquired; and
12) the amount paid by similar size businesses in the same area to equally
qualified employees for similar services.