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life insurance. Petitioners assert that the contributions all
were made to the plans to pay premiums on term life insurance and
that the premiums entitled the insureds to nothing more.
Respondent argues that section 162(a) does not allow
Neonatology and Lakewood to deduct their contributions in full.
Respondent concedes that Neonatology and Lakewood may deduct
their contributions to their plans to the extent that the
contributions funded term life insurance. See sec. 1.162-10(a),
Income Tax Regs.; see also Joel A. Schneider, M.D., S.C. v.
Commissioner, T.C. Memo. 1992-24; Moser v. Commissioner, T.C.
Memo. 1989-142, affd. on other grounds 914 F.2d 1040 (8th Cir.
1990). As to the excess contributions, respondent asserts, those
amounts are not deductible under section 162(a). Respondent
argues primarily that the excess contributions are distributions
of surplus cash and not ordinary and necessary business expenses.
Respondent points to the fact that the only benefit provided
explicitly under the plans was term life insurance and asserts
that the excess contributions did not fund this benefit.
We agree with respondent that the excess contributions which
Neonatology and Lakewood made to their plans are nondeductible
distributions of cash for the benefit of their employee/owners
and do not constitute ordinary or necessary business expenses.27
27 We need not and do not decide the correctness of
respondent’s alternative determinations disallowing deductions of
(continued...)
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