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C. Arrangements With PCs
VRD/RTD entered into arrangements with the PCs for the
provision of the doctors’ medical services. The doctors
performed their services for the patients of VRD/RTD, and VRD/RTD
billed the patients for the fees due on these services. VRD/RTD
received payment of the fees, deposited the payments into its
bank account, and reported the payments as income on its Forms
1065. Dr. Domingo performed services for VRD/RTD through the end
of 1999; afterwards, through 2003, Dr. Domingo continued to work
for his PC performing services for other than VRD/RTD. Dr.
DeAngelis terminated his services with VRD/RTD on or about
December 31, 2003.
D. Partnership Agreement
The VRD/RTD partnership agreement in effect for the subject
years (partnership agreement) was executed on June 19, 1990. The
partnership agreement stated that Drs. DeAngelis and Domingo were
employed by their PCs and that any future doctor who wished his
PC to become a partner of VRD/RTD had to be employed by his PC.
The partnership agreement stated that it was anticipated that Dr.
DeAngelis would fully retire from VRD/RTD on July 1, 1994, and
that Dr. Domingo would not retire until 1 year after Dr.
DeAngelis retired. If Dr. DeAngelis continued working for
VRD/RTD until at least July 1, 1995, the partnership agreement
allowed Dr. Domingo to retire at the same time as Dr. DeAngelis
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Last modified: March 27, 2008