WSB Liquidating Corporation - Page 17

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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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