Mr. Hazel, the principal executive officer of a publicly held corporation, received $2.5 million compensation this year. The compensation consisted of an $800,000 base salary and a $1.7 million year-end bonus for outstanding performance. The corporation is allowed to deduct the entire amount of Mr. Hazel's compensation.

Question

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The IRS limits the amount of compensation that can be deducted for tax purposes for certain employees of publicly traded companies to $1 million per year under Section 162(m) of the Internal Revenue Code. Any compensation above this limit, including bonuses, is not deductible unless it qualifies for exceptions such as performance-based compensation under the rules in effect before the Tax Cuts and Jobs Act of 2017, which also made changes to these exceptions.

Mr Hazel, the Principal Executive Officer of a Publicly Held