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Indeed, the Court has addressed this issue before. See
Roblene, Inc. v. Commissioner, T.C. Memo. 1999–161. Most
recently, the Court of Appeals for the Eighth Circuit, to which
this case is appealable, see Golsen v. Commissioner, 54 T.C. 742,
756–757 (1970), affd. 445 F.2d 985 (10th Cir. 1971), upheld a
decision of this Court excluding from “participant’s
compensation” the earnings of an independent contractor working
for the taxpayer, Howard E. Clendenen, Inc. v. Commissioner, 207
F.3d 1071 (8th Cir. 2000), affg. T.C. Memo. 1998-318. We follow
that holding and conclude that the management fees paid to Mr.
Van Roekel as an independent contractor are not included in
“participant’s compensation”, and that, consequently, the annual
additions allocated to Mr. Van Roekel’s account for fiscal years
1994, 1995, and 1996 exceeded the section 415(c)(1) limits.
Petitioner failed to show that it took remedial action to correct
the excess allocations to Mr. Van Roekel’s account. See Martin
Fireproofing Profit Sharing Plan & Trust v. Commissioner, 92 T.C.
1173 (1989). Accordingly, we hold that the plan is disqualified
for fiscal years beginning after July 31, 1993. Therefore, the
trust is not tax exempt under section 501(a).
Decision will be entered
for respondent.
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Last modified: May 25, 2011