Howard E. Clendenen - Page 5

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          In addition, petitioner reported the following expenses under               
          "Other Deductions":                                                         
               Year           Item                Amount                              
               1987      Sec. 401(k) bonuses      $30,000.00                          
               1989      Commission expenses      75,000.00                           
               1990      Bonuses                  60,000.00                           
               1991      Commissions              41,660.28                           
                         Bonuses                  55,000.00                           
               For the calendar years 1986 and 1987, Mr. Clendenen filed              
          joint U.S. Individual Income Tax Returns.  For 1988 through 1991,           
          he filed his returns with a filing status of single.2  Mr.                  
          Clendenen's returns reflect the following:                                  
                         Wages,         Business                                      
               Year      Salaries       Income Type of Business                       
               1986      $12,938        0                                             
               1987      30,000         0                                             
               1988           0         0                                             
               1989           0         $75,000   Insurance consulting                
               1990      0              60,000    Consultant                          
               1991           0         55,000    Consultant                          
          For the plan year ending June 30, 1986, and his taxable year                
          ending December 31, 1986, Mr. Clendenen treated $17,029.38 as an            
          elective deferral of compensation into the ESOP.                            
          Discussion                                                                  
               Section 401(a)(16) provides:                                           
               A trust shall not constitute a qualified trust under                   
               this section if the plan of which such trust is a part                 

               2  Mr. Clendenen was divorced on Jan. 11, 1988.                        




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