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1996, 1997, and 1998, respectively. Petitioner claimed no
deduction either for compensation of officers or for salaries and
wages in 1996 or 1997; for 1998, petitioner’s return reflects a
deduction of $15,000 for compensation of officers. Schedules K-
1, Shareholder’s Share of Income, Credits, Deductions, etc.,
attached to the returns show $15,605.36 for 1996, $27,362.14 for
1997, and $38,486.89 for 1998 as the pro rata share of, and as a
property distribution other than a dividend to, Ludlow.
Petitioner’s Forms 1120S were signed by Ludlow as president and
by Joseph M. Grey (Grey) as preparer.
During the period from 1996 to 1998, petitioner did not
issue any Forms W-2, Wage and Tax Statement, to Ludlow.
Petitioner also did not issue any Forms 1099-MISC, Miscellaneous
Income, to Ludlow in 1996 or 1997. In 1998, petitioner issued a
Form 1099-MISC to Ludlow for $15,000 “non-employee compensation”
and $7,200 “rents” for the use of Ludlow’s residence as a
business office for petitioner. Since petitioner’s incorporation
in 1989, petitioner has not reported paying Ludlow a salary or
wages for work he performed on behalf of petitioner.
Petitioner did not file a Form 941, Employer’s Quarterly
Federal Tax Return, for any quarter in 1996, 1997, or 1998 or a
Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax
Return, for 1996, 1997, or 1998.
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