- 11 -
the payment in his own income tax return, rather than in the
return of the corporation, as a "reversion". The real intent of
the payment to Mr. Souris is found in his agreement with the
corporation, which existed long before the events with which we
are concerned here. We conclude that the payment from the
corporation to Mr. Souris is deductible by the corporation as
reasonable compensation under section 162(a)(1).
Finally, a word about "employer reversion", which is defined
in section 4980(c)(2), and which is treated by both parties as
applicable here in connection with whether the employer reversion
is includable in the gross income of the employer for purposes of
the income tax. However, section 4980 literally relates solely
to an excise tax. Subsection (a) of section 4980 now imposes "a
tax of 20 percent of the amount of any employer reversion from a
qualified plan." And in defining the term "employer reversion"
subsection (c) begins with the words "For purposes of this
section". Yet, as just indicated, both parties in this case
treat the section 4980(c)(2) definition as applicable here for
purposes of the income tax. Indeed this Court has so indicated.
Lee Engineering Supply Co. v. Commissioner, 101 T.C. 189, 194
(1993); cf. S. Rept. 1567, 75th Cong. 3d Sess. at 24 (1938),
1939-1 C.B. (Part 2) 779, 796.
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 Next
Last modified: May 25, 2011