- 65 -
Associates, P.A. v. Commissioner, supra at 91-92, 95-96; see also
Neonatology Associates, P.A. v. Commissioner, 299 F.3d at
231-232. In accordance with the Federal income tax law
applicable to S corporations, most particularly sections 1367 and
1368, our disallowance of the deductions claimed by the PCs has
the effect of increasing pro tanto the net income of those PCs,
with corresponding increases to the doctors’ distributive shares
of that income. That being so, the payments of the premiums are
not taxed a second time to the doctors.23 Cf. Neonatology
Associates, P.A. v. Commissioner, 115 T.C. at 95-96 (tax at the
shareholder-level was appropriate where the employer was a C
corporation).
We have considered each argument made by petitioners for
holdings contrary to those expressed herein and have rejected all
arguments not discussed herein as irrelevant or without merit.
We also have considered each argument made by respondent for a
holding contrary to that expressed herein as to the inclusion in
23 In other words, we regard each distribution as a tax-free
recovery of adjusted basis, taking into account the increase in
basis resulting from the disallowance of deductions claimed by
the PC.
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