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incorporation on August 9, 1985. Petitioner issued shares of its
stock to the trust in payment of the contributions to the trust.
Robert and Charlene Peers were, during the taxable years
that ended July 31, 1987, through 1990, and are the founders and
sole officers of petitioner. Robert Peers was and is its
president, and Charlene Peers was and is the trustee of the
ESOP's trust. Robert and Charlene Peers also have been the only
participants in the ESOP.
Petitioner reported the following deductions on its U.S.
Corporation Income Tax Returns, Forms 1120:
Pension
Compensation Salaries Profit-sharing,
of Officers and Wages etc., plans
Year (Line 12) (Line 13) (Line 24)
1987 $0 $801.01 $45,000
1988 0 0 17,000
1989 0 0 10,050
1990 0 0 9,870
The deductions for "Pension, Profit-sharing, etc., plans" were
reflected as contributions to the trust in the trust's Forms
5500-C, Return/Report of Employee Benefit Plan, for each of such
years.
In addition, petitioner included the following commissions,
paid to nonemployees who were treated by petitioner as
independent contractors, on line 26, "Other deductions":
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