Information For...

For you and your family
Standard mileage and other information

Forms and Instructions

Individual Tax Return
Instructions for Form 1040
Request for Taxpayer Identification Number (TIN) and Certification
Request for Transcript of Tax Return

 

Employee's Withholding Allowance Certificate
Employer's Quarterly Federal Tax Return
Employers engaged in a trade or business who pay compensation
Installment Agreement Request

Popular For Tax Pros

Amend/Fix Return
Apply for Power of Attorney
Apply for an ITIN
Rules Governing Practice before IRS

Rebuttable Presumption - Intermediate Sanctions

If an organization meets the following three requirements, payments it makes to a disqualified person under a compensation arrangement are presumed to be reasonable, and a transfer of property or the right to use property is presumed to be at fair market value.  The three requirements for establishing the rebuttable presumption are:

  1. The compensation arrangement must be approved in advance by an authorized body of the applicable tax-exempt organization, which is composed of individuals who do not have a conflict of interest concerning the transaction,
  2. Prior to making its determination, the authorized body obtained and relied upon appropriate data as to comparability, and
  3. The authorized body adequately and timely documented the basis for its determination concurrently with making that determination.

The documentation of the authorized body should include the terms of the transaction and the date of its approval, the members of the authorized body present during the debate and vote on the transaction, the comparability data obtained and relied upon, the actions of any members of the authorized body having a conflict of interest, and documentation of the basis for the determination.

The Internal Revenue Service may refute the presumption of reasonableness only if it develops sufficient contrary evidence to rebut the probative value of the comparability data relied upon by the authorized body.

If an organization does not satisfy the requirements of the rebuttable presumption, a facts and circumstances approach will be followed.