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Allowability of Distribution of Profits

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FAR 31.205-6(a)(6)(ii) states compensation to owners must be reasonable for the personal services rendered, and not be a distribution of profits. Therefore, it appears that distribution of profits is not an allowable contract cost. However, payments made to owners are Not Automatically Unallowable if the payments are a distribution of profits on the accounting records of the enterprise. How is that for confusion! What option does the DCAA (Defense Contract Audit Agency) provide to auditors for the smaller firm?

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