Superior Proside, Inc. - Page 4




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          treating Murdock, or any other individual, as an employee of                
          petitioner.                                                                 
               Petitioner filed a Form 1120S for each of the years 1995,              
          1996, and 1997.  Petitioner reported ordinary income from its               
          trade or business of $29,671.48, $29,402.99, and $41,668.75 for             
          1995, 1996, and 1997, respectively.  Petitioner claimed no                  
          deduction either for compensation of officers or for salaries and           
          wages.  Schedules K-1, Shareholder’s Share of Income, Credits,              
          Deductions, etc., attached to the returns show $29,671.46 for               
          1995, $29,402.99 for 1996, and $41,668.75 for 1997 as the pro               
          rata share of, and as a property distribution other than a                  
          dividend to, Murdock.  Petitioner’s Forms 1120S were signed by              
          Murdock as president and by Joseph M. Grey (Grey) as preparer.              
               During the period from 1995 to 1997, petitioner did not                
          issue any Forms 1099-MISC, Miscellaneous Income, or Forms W-2,              
          Wage and Tax Statement, to Murdock.  Since petitioner’s                     
          incorporation in 1987, petitioner has not reported paying Murdock           
          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 quarters in 1995, 1996, or 1997 or a            
          Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax                 
          Return, for 1995, 1996, or 1997.  Throughout this period,                   
          petitioner did not treat any individual as an employee.                     








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