Herman E. and Sheri L. Villarroel - Page 2

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               Respondent determined a deficiency in petitioners' Federal             
          income tax for 1994 in the amount of $2,327.                                
               The issues for decision are:  (1) Whether petitioners are              
          required to include in their gross income any amount of a                   
          distribution from a qualified stock bonus plan; (2) whether the             
          amount of the distribution which must be included in their gross            
          income, if any, is subject to the section 72(t) additional tax;             
          and (3) the amount and character of the gain that petitioners are           
          required to include in their gross income from the subsequent               
          sale of a portion of the distributed stock.                                 
               Some of the facts have been stipulated and are so found.               
          The stipulations of fact and attached exhibits are incorporated             
          herein by this reference.  Petitioners resided in Terrace Park,             
          Ohio, on the date the petition was filed in this case.  All                 
          references to petitioner in the singular are to Sheri L.                    
          Villarroel.                                                                 
               Petitioner worked as an employee of Oral B Laboratories                
          (Oral B), a subsidiary of the Gillette Company (Gillette), for at           
          least 5 years as of October 1994.  By reason of her length of               
          employment, petitioner was eligible to participate in Gillette's            
          employee stock ownership plan (ESOP) when it was established in             
          1990.  Gillette made automatic contributions to the ESOP on her             
          behalf.  She was not permitted to make any contributions to the             
          ESOP on her own behalf.  The contributions and the earnings on              
          the contributions were invested in a special class of Gillette              




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