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1995, those individuals were: Drs. Ellis, Mann, James P. Miller,
and Timothy L. Black (collectively, the shareholder surgeons).
On June 30, 1995, Dr. Ellis ceased to be a shareholder, and, from
July 1, 1995, to December 31, 1995, petitioner was owned equally
by the three remaining shareholder surgeons.
Drs. Mann, Miller, and Black were employees of petitioner
for all of 1994 and 1995. Dr. Ellis was an employee of
petitioner for all of 1994 and until June 30, 1995.
Shareholder Surgeon Employment Contracts
With respect to their relative periods of employment during
the audit years, the shareholder surgeons were all employed by
petitioner pursuant to agreements containing similar terms
(sometimes, the shareholder employment agreements). Among other
things, the shareholder employment agreements provide: The
relationship between petitioner and the shareholder surgeon
“shall be that of an employer and an employee”. The agreement is
to continue from year to year if such is mutually agreeable to
the shareholder surgeon and the board of directors of petitioner
(the board). The shareholder surgeon “is employed to engage
exclusively, and actively in the practice of medicine on behalf
of the Association.” The shareholder surgeon “shall devote full
time and attention to rendering professional services on behalf
of the Association and in furtherance of its best interests”.
The shareholder surgeon has, however, the option of working less
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