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one-half of his stock interest in petitioner and acknowledged the
“pension” payments from petitioner to Barbara. Clearly, the
transfer of the stock to Barbara was in consideration of her
ownership interest in petitioner. However, in light of the facts
that petitioner had substantial retained earnings and never paid
dividends, that Barbara provided no services to petitioner in the
years petitioner made the payments, and that petitioner has not
proved that Barbara was undercompensated in prior years, it is
probable that some portion of the payments constituted a
distribution of earnings to Barbara. Nevertheless, it is not
necessary for us to decide what portion of the payments
constituted disguised alimony and what portion constituted a
distribution of earnings; in either event, they would not be
deductible by petitioner.6
Accuracy-Related Penalties
The remaining issue is whether petitioner is liable for
accuracy-related penalties under section 6662(a) as determined by
respondent. Respondent determined that the portion of
6 Respondent also argues that the deductions are limited by
sec. 404(a). In general, sec. 404(a) disallows deductions for
certain contributions to pension, annuity, and other plans, or
for compensation paid under a plan deferring the receipt of such
compensation. However, sec. 404(a) permits a deduction if the
contributions or compensation “would otherwise be deductible”, in
which case it affects the year in which deductions may be taken.
Because we find that the payments at issue in the instant case
are not “otherwise * * * deductible”, we need not address the
effect of sec. 404(a).
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