Safe Harbor Provision of The Law
Congress, in the legislative history, intended to create a rebuttable presumption of reasonableness, or safe harbor. Under this safe harbor, compensation is presumed to be reasonable and a property transfer is presumed to be at fair market value if: (1) the compensation arrangement or terms of transfer are approved, in advance, by an authorized body of the exempt organization, composed entirely of individuals without a conflict of interest, (2) the board or committee obtained and relied upon appropriate data as to comparability in making its determination; and (3) the board or committee adequately documented the basis for its determination, concurrently with making the decision.
The disqualified person or organization manager has the initial burden of proving that the compensation was reasonable. If the three criteria above are met, the burden of proof shifts to the IRS and the IRS must prove that the compensation was unreasonable. The IRS can rebut the presumption with sufficient contrary evidence showing the compensation was not reasonable or showing a transfer not to be at fair market value.
Read more about this topic: Intermediate Sanctions
Famous quotes containing the words safe, harbor, provision and/or law:
“I can see ... only one safe rule for the historian: that he should recognize in the development of human destinies the play of the contingent and the unforeseen.”
—H.A.L. (Herbert Albert Laurens)
““When was I ever anything but kind to him?
But I’ll not have the fellow back,” he said.
“I told him so last haying, didn’t I?
‘If he left then,’ I said, ‘that ended it.’
What good is he? Who else will harbor him
At his age for the little he can do?”
—Robert Frost (1874–1963)
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—Samuel Butler (1835–1902)
“The decisions of law courts should never be printed: in the long run, they form a counterauthority to the law.”
—Denis Diderot (1713–1784)