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 26




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          the policy insuring the life of Ms. Quinn.  Of the $10,000, Dr.             
          Capizzi’s PC paid $2,400 in 1993 and $2,000 in 1994.  The record            
          does not allow the Court to find the portion of the $10,000 in              
          either year that was paid by any of the other PC partners.                  
               During each of 1993 and 1994, VRD/RTD contributed $585,000             
          to the STEP plan and recorded each of these contributions as a              
          “Pension Contribution”.  VRD/RTD’s partnership return reported              
          the forwarding fees received from the PCs as income and claimed a           
          corresponding deduction for “Retirement plans, etc.”  VRD/RTD did           
          not make any further contribution to STEP, and neither STEP nor             
          any petitioner directly paid any further premium on the subject             
          life insurance policies after the premiums were paid on                     
          December 28, 1994, for the policy year beginning on that date.              
               B.  Issuance of Policies                                               
               When VRD/RTD adopted the STEP plan, all of VRD/RTD’s                   
          contribution to the plan was invested in whole life insurance               
          policies issued by MetLife and sold by Mr. Rapp.  The particular            
          policies were selected by the participating doctors in                      
          consultation with Mr. Rapp.  All of the policies were                       
          participating whole life insurance polices, with the additional             
          feature that extra premiums could be paid to purchase paid-up               
          additions rider insurance (PUAR).  A PUAR feature, when elected,            
          essentially prefunds the annual premiums for a policy and                   








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