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Background
Petitioner was a corporation existing under the laws of the
State of New York. At the time of the filing of its petition in
this case, petitioner's address was P.O. Box 852, Southampton,
New York. Michael Morrissey (Morrissey) was the owner of all of
the outstanding shares of petitioner's stock from 1972 through
the years in issue. Morrissey was also the president and
secretary of petitioner from inception.
Petitioner adopted the Defined Benefit Plan effective as of
November 1, 1976. The Defined Benefit Plan received a favorable
determination letter from the Internal Revenue Service dated
December 5, 1988. Since its inception, Morrissey has always been
the sole trustee of the Trust and as such has exercised complete
control over the management and disposition of the Defined
Benefit Plan assets.
The Defined Benefit Plan ceased benefit accruals in 1990,
at which time all plan participants were 100 percent vested. The
Defined Benefit Plan terminated pursuant to a resolution of
petitioner's board of directors dated September 4, 1990, and
effective September 26, 1990. When the Defined Benefit Plan
ceased benefit accruals and terminated in 1990, there were two
participants in addition to Morrissey. These two participants
were paid their full benefits in 1990 when the Defined Benefit
Plan terminated. With the payout to these two participants in
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