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Nor during that time did petitioner pay its officers any
compensation.
Petitioner established the MGMT ESOP on February 1, 1987.
By way of a trust agreement of the same day, petitioner also
established under Iowa law a trust (ESOT) that was part of the
MGMT ESOP. Under the MGMT ESOP, petitioner made contributions to
the ESOT for the purpose of distributing the trust’s corpus and
income to petitioner’s employees or their beneficiaries in
accordance with the MGMT ESOP. Under the trust agreement, the
ESOT’s corpus and income could not be used for purposes other
than the exclusive benefit of petitioner’s employees or their
beneficiaries. At all relevant times, the only participants of
the MGMT ESOP were the management officers.
The MGMT ESOP owned all of petitioner’s stock as of June 30,
1987.
On July 8, 1987, petitioner purchased all of the stock of
MFG from its then-current shareholders. MFG is an Iowa
corporation engaged in the business of manufacturing wood
products. MFG operates a sawmill and manufactures commercial
packaging wood products, such as pallets and crating materials.
It also finishes graded lumber used for the construction of
furniture and other finished items. During MGMT ESOP’s plan year
ended June 30, 1987, MFG had at least 45 employees, 39 of whom
were part time and at least 6 of whom were full time. The full-
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