Ans. 1 As per the rules and regulations in the Internal revenue service the allegation led by the company on the client, in the first case of unreasonable compensation The person's reward must be accepted in proceed by an "certified body." This can be the whole of a committee of the board, board of directors, or persons authorized by the board or other persons to act on its part. Thus, it is not obligatory to have the complete board agree the deal. It can be permitted by a board selected for the idea by the executives committee. They consist of minimum of two board members. However in IRS only one member is required as allowed under state's nonprofit business law. If tolerable by your state's nonprofit corporation act, a sovereign board consisting of non-board members can also be certified by the board to agree such dealings--for example, a board consisting of the managerial principal and chief financial officer. In this scenario there are three major shareholders in which one of the director is having 45% of the voting right there and his son is also having 45% therefore compensation is allowed. (IRS, 2014).
This section will be purposed as the allocation is significantly unbalanced if—
(i) The percentage which the selection companies stock which is investor owning bears corporation’s all voting stocks immediately after the redemption and was 80 percent for the first time.
(ii) The share of the company’s voting stock owned by the investor owning bears corporation’s all voting stocks immediately after the redemption there should be no distribution significantly unbalanced unless the investor’s possession of the general corporation stock which is after or before the redemption meeting the requirements of 80 percent of share. Former judgment purpose can be described as if one set of universal stock which is available to reasonable promote price. As the majority of the shares are hold the client and his son so there is no point of the rental loss. After getting all the above points the client can go for the further appeal. (Journal of Accountancy, 2014).

Ans2.
According to IRC SEC 301 if the IRS is sharing that amount which is on fair market value of assets received therefore, in this scenario the stock is lying 50% by the client and his son the value is determine as the fair market value as per the section 301 of the IRC of the IRS, as the stock is treated as dividend under the rules there the FMV is determined the gross income. (Investorwords, 2014).

Ans3. The amount of 301 Section of IRS of the IRC of the distribution in excess of the e and p allocated thereto is treated as a capital return for shareholders to the limit of its foundation in the shares and the stock whose root is abridged by that sum. (IRS, 2014).
Section 301 states that excess distribution over the shareholder’s stocks is capital gain and can be treated to the same by stock sailing. Sec 301(c) (3) (A). The tax consequence of a shareholder's receiving a section 301 distribution depends upon the "earning and profits" where the distribution was actually made by the distribution corporation. A quick definition: The term “profits and earnings” is a term of art in tax law. In simple words we can describe it as the corporate funds which are distributed to the corporate shareholders without the reduction in their own capital. (BUS, 2014).
Because there is no difference actually in a situation of redemption occurring by pro rata basis to the shareholders and the penalty of tax of both dealings would be similar. So when they withdrew as they did (not changing their shareholder interests) his was a very clean (obvious) 301 distribution. SO, as long as the distribution isn't a partial and (or Complete) complete liquidations1 0 and for certain redemptions of stock. Finally, to go just deeply enough to touch on one other aspect that applier in this situation we should touch on the attribution of section 318. To determine the tax consequences of a stock deliverance, it is first required to determine the amount of stock constructively owned by a shareholder under section 318, which provides for attribution in four separate situations: The first of the four applies here: Family attribution: an individual is deemed to own the stock own by or for any relation. When stock is attributed to a person by section 318, he is pleasured and treated as if he is the actual owner of that asset. (BUS, 2014).
Now here are the general points that should kept in mind in terms of planning when documenting ownership interest and capital account for this purpose.
Taxable Dividends -- A SH must include in the income which is calculated on the gross basis and where the distribution amount is actually dividend from the view of the corporation. (Journal of Accountancy, 2014).
Sec. 316(a) defines a dividend as a property distribution occurred due to corporation out of its earnings and profits (E&P). Property includes money, stock or stock rights and securities of the distributing corporation. (BUS, 2014).
E&P distributions are treated as return of capital and basis of excess are capital gains.
E&P is deprived by - Current E&P and Accumulated E&P. Current E&P is calculated annually and accumulated E&P is the sum of undistributed current E&P figures for the past years reduction by the addition. Distributions come first from current E&P and then from accumulated E&P if current E&P is insufficient. (BUS, 2014).
What you include to carry on in mind is that the duty policy says that amounts over and above wealth aid are either surplus or capital gains.
And if you take no stroke, in years where revenue is made capital taken out that is above salary will be taxed as revenue/income.
So one objective that you can definitely do is to regulate the funds account sliding and treat that as a return of funds but remember that this will have the potential effect of raising assets gains when the company is sold. (Journal of Accountancy, 2014).

Ans 4.
First Step: - Pertinent facts gather about the company that it is the agent or the client who is the shareholder and the president holding 95% of the shares of a business related to warehousing and building supply materials and sales. In a construction company there is another holding of 50% of the shares. And the remaining shares of the construction company are being held by the agents or clients son. (IRS,2014).
Second Step :- Search issues to be identified that there was a redemption of the shares of 50% in the construction company which were actually held by client and his son left with 50% of each share. Section 301 IRC IRS states this redemption to be distribution. (IRS,2014).
Third Step: - To locate the search authority in this case the search authority is the IRC of the IRS. (IRS,2014).
Fourth Step: - Interpret and applied authority: - The Company and their directors has to work according to the rules prescribed in the IRS of the IFC. (IRS,2014).
Fifth Step: - Develop recommendations and conclusions: - As per the scenarios
The amount of a section 301 IRS of the IRC of the distribution in excess of the e and p allocated thereto is treated as shareholder capital should get return at least to the extent of the holding basis stock in the organization. The Tax Consequences of the shareholder's received under section 301 is all about profits and the earnings of the distributing corporation at the time that the distribution was made. After all the above points we conclude that the directors have not changed the shareholders interest this was a very clean SEC 301 distribution. (IRS,2014).
Sixth Step:- TO Communicate the final result :- the Company should go for further appeals as they have distribute the stock as per the rules prescribed as per the section of the IRS of the IFC. (IRS,2014).

References:
Internal Revenue Service. 2014. Internal Revenue Service. [ONLINE] Available at: http://www.irs.gov. [Accessed 02 May 2014].
Preventing a challenge to (un)reasonable compensation . 2014. Preventing a challenge to (un)reasonable compensation . [ONLINE] Available at: http://www.journalofaccountancy.com/Issues/2013/Sep/20137412.htm. [Accessed 02 May 2014].
What is Fair Market Value? definition and meaning. 2014. What is Fair Market Value? definition and meaning. [ONLINE] Available at: http://www.investorwords.com/1878/fair_market_value.html. [Accessed 02 May 2014].
Charles F. Kelliher, Ph.D. | Home . 2014. Charles F. Kelliher, Ph.D. | Home . [ONLINE] Available at: http://www.bus.ucf.edu/faculty/ckelliher/. [Accessed 02 May 2014].