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responsible for allocating its contributions among the
participants’ accounts in proportion to their compensation.5
For years ending July 31, 1994, 1995, and 1996, the plan
filed Forms 5500–C/R, Return/Report of Employee Benefit Plan,
showing contributions of $2,250, $2,700, and $2,550,
respectively. Similarly, for each of those years, petitioner
deducted $2,250, $2,700, and $2,550, respectively, on Forms 1120,
U.S. Corporation Income Tax Return, as payments to the plan on
behalf of Mr. Van Roekel. As shown below, petitioner reported no
deduction for salaries, wages, or officers’ compensation but
deducted management fees paid to Mr. Van Roekel as an independent
contractor:
Pension, Other
Tax year Compensation of Salaries and profit sharing, deductions1
ending officers wages etc., plans (management fees)
1994 –0– –0– $2,250 $15,000
1995 –0– –0– 2,700 218,000
1996 –0– –0– 2,550 15,000
1Petitioner claimed miscellaneous expenses as “Other deductions” on line 26 of Form
1120 and attached a schedule in which it separately stated each expense.
2Petitioner included this amount on line 27 of Form 1120 titled “Total deductions”
and not on line 26.
For calendar years 1994, 1995, and 1996, Mr. Van Roekel and
his wife, Darlene, filed joint Federal income tax returns. He
worked as petitioner’s farm manager on an independent contractor
basis, and, as reflected below, reported the management fees that
5The ESOP defined compensation as “compensation paid by the
Employer to the Participant during the taxable year ending with
or within the Plan Year which is required to be reported as wages
on the Participant’s Form W-2”.
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Last modified: May 25, 2011