Howard E. Clendenen - Page 3




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          In this notice of deficiency, respondent based the determinations           
          on the plan’s being nonqualified.  On August 21, 1996, Mr.                  
          Clendenen filed a petition with the Court in which Mr. Clendenen            
          referred to the “erroneous allegation that said trust is not                
          qualified.”                                                                 
               On September 29, 1997, the parties in both cases each filed            
          a joint motion for continuance.  The parties sought a continuance           
          in order to present the plan qualification issue to the Court in            
          a declaratory judgment action, Howard E. Clendenen, Inc. v.                 
          Commissioner, docket No. 18155-96R, because the qualified status            
          of the plan was the significant issue in these cases.  On October           
          2, 1997, the Court granted these motions.                                   
               On February 13, 1998, the corporation and Mr. Clendenen each           
          filed a Stipulation of Settled Issues.  The corporation’s                   
          stipulation of settled issues provided in part:                             
                    8.  For the taxable year ended June 30, 1987, the                 
               parties agree that the issue designated “ESOP Contribution             
               to Non-Qualified Plan” in the notice of deficiency is                  
               consequential to the issue of plan qualification in related            
               docket 18155-96 “R”.                                                   
                    9.  For the taxable year ended June 30, 1988, the                 
               parties agree that the issue designated “Deductible                    
               Dividends to ESOP” in the notice of deficiency is                      
               consequential to the issue of plan qualification in related            
               docket 18155-96 “R”.                                                   
                    10.  For the taxable year ended June 30, 1988, the                
               parties agree that the issue designated “Non-Qualified                 
               Contribution - Allowed in Yr. included in 1040" in the                 
               notice of deficiency is consequential to the issue of plan             
               qualification in related docket 18155-96 “R”.                          






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