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 25




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          employee.  According to the STEP plan, any life insurance that              
          was not purchased could be surrendered by the trustee or                    
          continued with the plan as beneficiary.                                     
          VII.  VRD/RTD’s Contributions to STEP                                       
               A.  Forwarding Fees                                                    
               The PCs of the participating doctors forwarded to VRD/RTD              
          amounts required by STEP to pay the premiums due on the whole               
          life insurance policies written on the lives of the participating           
          doctors.  The PCs and VRD/RTD referred to these transactions as             
          “forwarding fees”.  During the subject years, VRD/RTD received              
          the following amounts of forwarding fees from the PCs:                      
          PC                       1993       1994                                    
               Vincent R. DeAngelis M.D.P.C.     $300,000   $300,000                  
               Rodolfo T. Domingo M.D.P.C.        225,000    225,000                  
               Keith Durante M.D.P.C.              50,000     50,000                  
          Total                            575,000    575,000                         
          The PCs deducted these forwarding fees as expenses in the year of           
          payment.                                                                    
               VRD/RTD recorded its receipt of the forwarding fees from the           
          PCs as “Fee Income--DeAngelis PC”, “Fee Income–-Domingo PC”, and            
          “Fee Income–-Durante PC”, respectively.  VRD/RTD recorded that              
          these amounts were received from the PCs as pension contributions           
          with respect to the participating doctors.  VRD/RTD also received           
          a total of $10,000 in each of the years 1993 and 1994, from the             
          five PCs that were partners in VRD/RTD.  The $10,000 was                    
          forwarded in each year to the STEP plan to pay the premium due on           






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