- 17 - Commissioner, T.C. Memo. 1971-238; Smith v. Commissioner, T.C. Memo. 1970-243; Bogene, Inc. v. Commissioner, T.C. Memo. 1968-147. Respondent has stipulated that during the years at issue Mr. Schmidt was an employee of Hillside Dairy. Indeed, Mr. Schmidt was the corporation’s only employee. And without Mr. Schmidt’s involvement, Hillside Dairy could not have raised its crops or conducted its dairy operations. Mr. Schmidt’s compensation for services rendered to Hillside Dairy was his salary and employee benefits. Respondent does not contend that Mr. Schmidt received excessive compensation. Indeed, respondent contends that Mr. Schmidt was undercompensated for his services Although Mrs. Schmidt did not work for Hillside Dairy, payment of her medical expenses was based on her status as Mr. Schmidt’s spouse. Likewise, payment of the medical expenses for the Schmidts’ children was based on their status as Mr. Schmidt’s dependents. The derivative participation of Mr. Schmidt’s spouse and dependents is plainly contemplated both by the medical plan and by section 105(b). On the basis of the record before us, we conclude that medical payments for the benefit of the Schmidts and their children were made under a plan for employees and not for shareholders. Accordingly, during the years at issue, thePage: Previous 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 Next
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