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would then audit the transmittal form and issue a statement to
Snorek Upholstery stating the amount it should reimburse the
eligible employee.
Mrs. Snorek, as owner and operator of Snorek Upholstery, and
petitioner Ivan Snorek (Mr. Snorek) executed a written employment
agreement near the end of 2000, in which Mr. Snorek agreed to
perform repair and recovery services for Snorek Upholstery
beginning in 2001. The employment agreement specified that Mr.
Snorek would annually receive $480 in wages and would be an
eligible employee under the plan.
Mr. Snorek performed services for Snorek Upholstery in 2001
and was paid $480. Near the end of 2001, Mr. Snorek submitted an
employee benefit expense transmittal form (transmittal form) to
the plan, claiming that he had paid $10,355 of eligible medical
expenses during the year. Of this amount, $3,906 was
attributable to premiums paid on a Blue Cross/Blue Shield
individual health insurance policy for Mrs. Snorek. The record
does not contain any evidence showing that Mr. Snorek paid the
health insurance premiums for Mrs. Snorek, or that he was
reimbursed by Snorek Upholstery.
Petitioners filed a joint Federal income tax return for
2001. Petitioners reported income and expenses from Snorek
Upholstery on Schedule C, Profit or Loss From Business.
Petitioners deducted $10,355 as an employee benefit plan expense.
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Last modified: May 25, 2011