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of the corporation. In addition, Mr. Schmidt had a dairy
operation separate from that of the corporation. Mr. Schmidt
also did custom hire work for his brother on land approximately
4-1/2 miles from the Schmidt farm.
E. Compensation and Payment of Food, Lodging, and Medical
Expenses
Mr. Schmidt was the sole employee of Hillside Dairy.
Hillside Dairy paid Mr. Schmidt, as an officer/employee, $750 in
1995 and $200 in 1996 and 1997.
Following the transfer of the Schmidt farm to Hillside
Dairy, the Schmidts continued to use the farmhouse as their
residence. Hillside Dairy paid for (1) the food consumed by the
Schmidts and their children, (2) the utilities, property tax, and
insurance for the farmhouse, and (3) the cost of some of the
meals consumed by the Schmidts and their children away from the
farmhouse (dining-out expenses). In addition, Hillside Dairy
paid all the medical care expenses of the Schmidts and their
children.
Hillside Dairy did not pay dividends for fiscal years ended
November 30, 1995, 1996, and 1997.
F. Income Tax Returns
Mr. Schmidt was responsible for keeping the books and paying
bills for Hillside Dairy. Mr. Bleeker (petitioners’ counsel)
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