In 2016 the IRS audits a company's 2014 tax return and determines that the president's salary was excessive and disallowed $100,000 of the salary deduction.Under the terms of the hedge (payback)agreement in the corporate bylaws,the president repays $100,000 of her salary to her employer in 2016.The president will amend her 2014 tax return to get a refund of the taxes paid on the excess salary.

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The president cannot amend her 2014 tax return to get a refund for the taxes paid on the excess salary. Instead, she can claim a deduction for the repayment in the year it was repaid (2016) under the "claim of right" doctrine.

In 2016 the IRS Audits a Company's 2014 Tax Return