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Lo deducted on his joint 1993 Federal individual income tax
return.
The Marlton Plan provides in relevant part that: (1) Each
person covered by the plan is entitled to a death benefit equal
to eight times his or her prior-year compensation, (2) an
employee’s spouse may not join the plan, and (3) a proprietor may
join the plan only if 90 percent or more of the plan’s total
participants are employees of Marlton on 1 day of each quarter of
the plan year. The only persons covered by the Marlton Plan are
Dr. Lo, Ms. Lo, and Edward Lo,21 and, during 1994, the Marlton
Plan purchased a separate insurance policy on the life of each of
these persons. None of these persons, had he or she died, would
have received a death benefit under the plan equal to eight times
his or her prior-year compensation. Ms. Lo was a Marlton
employee during 1994, and it paid her, ostensibly as employee
compensation, $46,800, $51,600, and $54,000 during the respective
years from 1992 to 1994. Edward Lo was an employee of Marlton
during 1994, and it paid him, ostensibly as employee
compensation, $39,930, $39,358, and $37,918 during the years 1992
through 1994. Dr. Lo was never a Marlton employee, and he was
not eligible to participate in the plan during any of the
21 The record does not reveal Edward Lo’s relationship (if
any) to Dr. Lo.
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