[Code of Federal Regulations]
[Title 26, Volume 2]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR1.162-8]

[Page 781]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.162-8  Treatment of excessive compensation.

    The income tax liability of the recipient in respect of an amount 
ostensibly paid to him as compensation, but not allowed to be deducted 
as such by the payor, will depend upon the circumstances of each case. 
Thus, in the case of excessive payments by corporations, if such 
payments correspond or bear a close relationship to stockholdings, and 
are found to be a distribution of earnings or profits, the excessive 
payments will be treated as a dividend. If such payments constitute 
payment for property, they should be treated by the payor as a capital 
expenditure and by the recipient as part of the purchase price. In the 
absence of evidence to justify other treatment, excessive payments for 
salaries or other compensation for personal services will be included in 
gross income of the recipient.