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Petitioner proposed findings of fact that he “did not
participate in setting the yearly salaries paid by the Sley
Corporations”, that he “does not know who decided how to allocate
the salaries among the Sley Corporations”, and that he “believes
decisions regarding salaries paid by the Sley Corporations were
made by the corporations’ officers.”
Before the Sley Corporations were moved into Grossman &
Flask facilities, Betsy and Ben did not receive salaries from the
Sley Corporations. Then Betsy and Ben received salaries, but
31(...continued)
affects petitioner’s and Betsy’s income taxes, not just the
income taxes of the payor corporations. In particular, it
affects the Schedule W deduction (sec. 221) and the I.R.A.
contribution deduction (sec. 219), both of which are dealt with
supra note 3, and the excise tax (sec. 4973), which is dealt with
supra note 2. It also has a consequence as to the proper
treatment of the amounts withheld as F.I.C.A. taxes from the
amounts paid to Betsy. See supra table 3; supra note 30.
However, petitioner implicitly conceded the Schedule W and I.R.A.
contribution adjustments, respondent conceded the excise tax, and
neither side pursued the dispute about the credit for withheld
F.I.C.A. taxes.
Respondent contends that the salary arrangement was part of
a “corporate tax evasion scheme” guided by petitioner, and so
shows petitioner willing to commit tax fraud. At the same time,
(1) respondent understands that both the Schedule W and I.R.A.
deductions “turn on the question whether amounts paid to Betsy by
Markette Corporation during those years represent compensation
for services actually rendered”, but (2) respondent does not
contend that the underpayments resulting from the Schedule W and
I.R.A. deductions in the instant cases are due to fraud.
In light of this apparent inconsistency in respondent’s
position, coupled with the above-described resolutions of the
adjustments that flow from the salary issue, we conclude that it
is not necessary for us to decide in the instant cases whether
the payments to Betsy constituted salary or additional dividends.
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