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On November 14, 1989, Michael entered into an agreement with
the corporation, acting on behalf of the corporation in his
capacity as its president. The agreement stated that the sole
compensation for his services would be his share of the
corporation's profits. Under the agreement, Michael was
permitted to withdraw monetary advances of anticipated profits.
The advances were to be treated as a loan on the corporation's
books to the extent they exceeded the corporation's profits.
On December 2, 1991, Jody entered into a similar agreement
with the corporation with Michael acting on the corporation's
behalf as its president. Michael stated at trial that the copy
of the agreement submitted to the Court was amended subsequent to
its execution but maintained that the substance of the document
was not changed by the added language. On brief, Michael
admitted that Jody was "somewhat oblivious of the exacting
parameters" of the agreement.
Respondent argues that the aforementioned agreements should
be disregarded and that portions of the amounts paid to or on
behalf of Michael and Jody should be treated as employee wages
earned with respect to their personal services rendered to the
corporation. Respondent contends that Michael used these
agreements to avoid paying employment taxes under the Federal
Insurance Contributions Act (1954), ch. 736, 68A Stat. 415,
currently codified at 26 U.S.C. secs. 3101-3128 (1994) on the
amounts paid to or on behalf of himself and Jody. See secs.
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