- 81 -
extent they did fund term life insurance for the relevant
employees.
3. Neonatology Contributions as to Mr. Mall
Neonatology contributed money to the Neonatology Plan for
the benefit of Mr. Mall. Mr. Mall was neither an employee of
Neonatology nor an individual who was eligible to participate in
Neonatology’s Plan. We conclude that these contributions served
no business purpose of Neonatology, and, hence, that they were
not ordinary and necessary expenses paid to carry on
Neonatology’s business. 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. The
contributions are nondeductible constructive distributions to Dr.
Mall.33
4. & 5. Marlton Contributions as to Dr. Lo and Its Two Employees
Marlton contributed money to the Marlton Plan to purchase
life insurance on the lives of three individuals; namely, Dr. Lo,
Ms. Lo, and Edward Lo. As to Dr. Lo, he was neither a Marlton
employee nor an individual who was eligible to participate in
Marlton’s plan. We conclude that the contributions made on his
behalf served no legitimate business purpose of Marlton, and,
33 We view Dr. Mall, Neonatology’s sole shareholder, as
having directed her corporation to make these contributions on
behalf of her husband. Accordingly, we view these contributions
as passing first through Dr. Mall on the way to the Neonatology
Plan.
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