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Petitioner received a Form 1099-MISC, Miscellaneous Income,
from Orthopedic reporting “non-employee compensation” during each
of the quarters at issue. The Forms 1099-MISC reported that
Orthopedic paid petitioner $125,152.63 in 1994, $225,469.24 in
1995, and $212,863 in 1996. Petitioner reported the amount
reflected on the Forms 1099-MISC as its total gross receipts on its
Form 1120S, U.S. Income Tax Return for an S Corporation, for 1994,
1995, and 1996.
On Forms 1120S, petitioner reported net income from its trade
or business for 1994, 1995, and 1996 in the respective amounts of
$83,995.50, $173,030.39, and $161,483.35. Petitioner paid these
amounts to Dr. Sadanaga, and reported these amounts as Dr.
Sadanaga’s share of its income on Schedules K-1, Shareholders’
Shares of Income, Credits, Deductions, etc., of the Forms 1120S.
Petitioner reported on Schedules M-2, Analysis of Accumulated
Adjustments Account, Other Adjustments Account, and Shareholders’
Undistributed Taxable Income Previously Taxed, of the Forms 1120S,
that the amounts it paid to Dr. Sadanaga were distributions other
than dividend distributions paid from accumulated earnings and
profits.
Petitioner did not issue a Form 1099-MISC or a Form W-2, Wage
and Tax Statement, to Dr. Sadanaga for 1994, 1995, or 1996. Nor
did petitioner file a Form 941, Employer’s Quarterly Federal Tax
Return, or a Form 940, Employer’s Annual Federal Unemployment Tax
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Last modified: May 25, 2011