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distributed to any distributee by any employees' trust described
in section 401(a)". Respondent argues that petitioners cannot be
proper distributees of the trusts since petitioners are
independent contractors not employees. In respondent's view the
trusts would violate the "exclusive benefit rule" provided for in
section 401(a)(2) if they included nonemployees such as
petitioners. While agreeing that the pension plan and
corresponding trust were qualified6 for the years in issue and
the plans are not parties to this action, respondent nevertheless
argues that petitioners are not "qualified participants" in
either plan.
Respondent argues that petitioners should be taxed pursuant
to section 83(a), which taxes property transferred to an employee
or an independent contractor in connection with the performance
of services. In his reply brief, for the first time, respondent
contends that the economic benefit doctrine provides a legal
basis for taxing petitioner.
Respondent further argues that petitioners may not be
independent contractors for income tax deduction purposes and
employees for pension plan purposes. Respondent argues that
petitioners' reliance on Butts v. Commissioner, supra, and Ware
v. Commissioner, supra, is misplaced and that their reading of
6 Petitioners did not request such a finding of fact as to
the profit sharing fund. Respondent, however, does refer to "the
qualified plans at issue" on brief.
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