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plan, STEP was at no significant loss in allowing each PC to
remove from the plan the money it invested therein.21
Petitioners rely erroneously on Booth v. Commissioner,
108 T.C. 524 (1997), in arguing that these cases turn primarily
not on the application of section 162(a) but on the question of
whether the STEP plan meets the requirements of section
419A(f)(6). As discussed herein, our decisions in these cases
turn on our factual evaluation of the relationship between the
participating doctors and their whole life insurance policies
without any regard to the STEP plan’s qualification under section
419A(f)(6), and we decide on the basis of the credible evidence
in the record before us that those doctors upon investing in the
STEP plan had the primary right to receive the value reflected in
the insurance policies written on their lives. We note in this
regard that the Court in Booth v. Commissioner, supra, did not
decide the issue under section 162(a) that we decide today.
In sum, we find that the PCs’ payments to VRD/RTD were
distributions to the doctors personally and that neither those
payments nor VRD/RTD’s ensuing contributions to STEP were
ordinary and necessary business expenses under section 162(a)
21 We also are mindful that the provisions in the STEP plan
were routinely not followed; e.g., Dr. Domingo received a
“severance” benefit even though he informed the STEP plan
administrator that he had “completely retired”, a situation that
even the author of the STEP plan admitted was not an eligible
event under the STEP plan as written.
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Last modified: March 27, 2008