Question

Only compensation must be reasonable in amount to be deductible pursuant to IRC § 162.

a. True
b. False

Answer 1

Compensation must not only be reasonable in amount, but also ordinary and necessary in order to be deductible under IRC § 162.

Step-by-step explanation:

The statement in the question is false. According to IRC § 162, in order for a compensation to be deductible, it must be both reasonable in amount and ordinary and necessary for carrying on a trade or business. This means that the compensation must be within the range of what is commonly paid for similar services in the same industry.