V.R. DeAngelis M.D.P.C. & R.T. Domingo M.D.P.C., V. R. DeAngelis M.D.P.C., Tax Matters Partner, et al. - Page 5

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          II.  Individual Petitioners                                                 
               A.  Overview                                                           
               Petitioner doctors are Vincent DeAngelis (Dr. DeAngelis),              
          Rodolfo Domingo (Dr. Domingo), Keith Durante (Dr. Durante), and             
          Anthony J. Capizzi (Dr. Capizzi) (collectively, doctors).  During           
          1993 and 1994, each doctor wholly owned an S corporation that               
          employed the doctor to provide his medical and surgical services            
          for VRD/RTD.  Each S corporation was a professional corporation             
          (PC), the sole employee of which was its owner.  The names of the           
          PCs of Drs. DeAngelis, Domingo, Durante, and Capizzi were Vincent           
          R. DeAngelis M.D.P.C., Rodolfo T. Domingo M.D.P.C., Keith Durante           
          M.D.P.C., and Anthony J. Capizzi M.D.P.C., respectively.                    
               Each doctor and his wife filed a joint Form 1040, U.S.                 
          Individual Income Tax Return, for each of the years 1993 and                
          1994.  Each couple’s returns reported compensation received from            
          the doctor’s PC during those years.4                                        

               4 We use the term “compensation” to refer to wages,                    
          salaries, and the like.  Unlike petitioners, we do not consider             
          the term “compensation” to include the doctors’ distributive                
          shares of income from their PCs.  See sec. 61(a)(1), (13)                   
          (distinguishing as separate items of gross income "Compensation             
          for services, including fees, commissions, fringe benefits, and             
          similar items" from "Distributive share of partnership gross                
          income"); cf. Campbell v. Commissioner, 943 F.2d 815, 822 (8th              
          Cir. 1991), affg. in part and revg. in part on other grounds T.C.           
          Memo. 1990-162.  Nor (as discussed below) does the STEP plan                
          define the term “compensation” to include such distributive                 

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