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(B) the lesser of--
(i) the amount of the employee contributions
in excess of 6 percent of his compensation, or
(ii) one-half of the employee
contributions,[4] and
(C) forfeitures.
The dispute in this case focuses on the amount of the
contributions to the trust allocated to Mr. Clendenen. The
parties disagree as to what constitutes participant compensation
and as to whether elective deferral amounts constitute employee
or employer contributions. It is petitioner's position that the
amounts of elective deferrals are employee contributions and
should be included in "participant's compensation". Petitioner
also asserts that "participant's compensation" includes amounts
petitioner paid as commissions and bonuses to Mr. Clendenen as an
independent contractor. As a consequence, petitioner maintains
that the limitations of section 415(c)(1) have not been exceeded
with the result that the plan and trust were qualified during the
years at issue.
Respondent asserts that the amounts of elective deferrals
constitute employer, not employee, contributions and that these
amounts and the commissions and bonuses do not constitute
4 Sec. 415(c)(2)(B) was amended by the Tax Reform Act of
1986, Pub. L. 99-514, sec. 1106(e)(1), 1106(i), 100 Stat. 2424,
2425, for the years beginning after Dec. 31, 1986, to include the
entire employee contribution in the computation of the annual
addition.
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