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Year Commissions
1987 $45,000
1988 68,000
1989 67,000
1990 65,800
Robert and Charlene Peers filed joint U.S. Individual Income
Tax Returns. Their returns reflect the following:
Wages, Salaries, Business Principal
Year tips, etc. Income Business
(Form 1040-Line 7) (Schedule C) (Schedule C)
1987 $0 $32,922 --
1988 0 53,718 Real Estate Sales
1989 31,426.65 57,271.12 Real Estate Sales
1990 40,040 60,543 Realtor
For 1989, we note that no W-2 is included in the record to
determine the source of the $31,426.65 of salaries and wages.
Since petitioner paid $0 in compensation to officers and $0 in
salaries and wages for 1988, 1989, and 1990, it would appear that
this income is from another employer. For 1990, a Form W-2 is
attached to the tax return of Robert and Charlene Peers
indicating that First Realty Ltd. paid $40,040 to Robert and
Charlene Peers.
Discussion
Prior to discussing the respective arguments of the parties
regarding the qualification of petitioner's ESOP as exempt from
taxation, a brief summary of the pertinent statutes is helpful.
Section 501(a) provides that a trust described in section 401(a)
is generally exempt from taxation. Section 401(a) discusses the
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