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The stipulation of facts and attached exhibits are incorporated
herein by this reference.
Petitioners were married to each other at all relevant times
and resided in Weirton, West Virginia, at the time the petition
was filed. Petitioners, John U. Fazi (Mr. Fazi) and Sylvia Fazi
(Mrs. Fazi), were employees of Dr. J.U. Fazi, Dentist, Inc.
(corporation), a West Virginia corporation.
The corporation established and operated three employee
pension benefit plans: (1) The Dr. J.U. Fazi, Dentist, Inc.
Employees Pension Plan, a money purchase pension plan (plan 1);
(2) the Dr. J.U. Fazi, Dentist, Inc. Employee Profit Sharing Plan
(plan 2); and (3) the Dr. J.U. Fazi, Dentist, Inc. Retirement
Plan, a defined benefit plan (plan 3).
Plan 1, when originally adopted by the corporation in 1972,
was qualified4 under section 401, and the accompanying trust was
a qualified, tax-exempt trust under section 501. Plan 1 and its
trust maintained their qualified status until the plan year
ending August 31, 1985. We held in Fazi v. Commissioner, 102
T.C. 695 (1994) (Fazi I), that plan 1 was not qualified, and its
employee trust was not exempt, for the plan years ending in 1985,
1986, and 1987 due to the corporation's failure to adopt formally
4 Throughout the relevant statutes, regulations, and opinions of the courts,
the terms "qualified" and "exempt" have occasionally been used synonymously,
and the terms "unqualified" and nonexempt" have also been synonymously used.
For convenience, the terms "qualified" and "unqualified" may be used in
situations where they refer to or modify the employee trust, rather than the
plan.
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