T.C. Memo. 2001-81
UNITED STATES TAX COURT
PEDIATRIC SURGICAL ASSOCIATES, P.C., Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 12743-98. Filed April 2, 2001.
P is a personal service corporation in the
business of providing pediatric surgical services. It
employs both shareholder surgeons and nonshareholder
surgeons to perform such services. For the years in
issue, the shareholder surgeons received a fixed
monthly salary plus monthly bonuses consisting of
available cash less amounts needed to pay P’s near-term
expenses. The nonshareholder surgeons received only a
fixed monthly salary. P deducted the amounts paid to
the shareholder surgeons as “officers compensation”.
R disallowed a portion of such deductions on the
ground that a portion of the amounts paid to the
shareholder surgeons was a dividend rather than
officers’ compensation. R also determined that P was
subject to a sec. 6662, I.R.C., accuracy-related
penalty for each of the years in question. Ultimately,
R sharply reduced his proposed deficiencies to amounts
determined to represent P’s profits attributable to
services rendered by the nonshareholder surgeons. P
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