Masonry Magazine January 1970 Page. 34
Taxes
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(Continued from page 33) repaired furnaces, sold stock to his three key employees until each one owned one-third of the stock of the corporation. The founder was chairman of the Board of the corporation and the other three were the remaining directors and sole stockholders.
These four individuals entered into employment contracts with the corporation which provided for a base salary and additional compensation in the form of a percentage of the net profits. The Commissioner disallowed in unequal amounts the total compensation paid to these men after the corporation attempted to deduct the compensation paid.
When the case reached the Tax Court, it was held that the amounts paid were unreasonable and excessive and the court determined separately the reasonableness of the compensation paid to each individual officer. In reaching its decision, the Court placed great emphasis on the profit-sharing phase of the compensation. It seems that a provision had been made to have each individual's pro rata share paid to his heirs should he die before the end of the fiscal year (when profits were computed.) Such a provision, said the Court, was more characteristic of distributions of earnings rather than compensation for services actually performed. Boyle Fuel Co. v. Commissioner, 53 TC No. 18.
H.R.10 PLANS
Statistics on the qualification of H.R. 10 plans (self-employed individuals) and on employee benefit plans for the first 9 months in 1969 have just been released by the Treasury Department.
H.R. 10 Plans:
Profit-sharing plans 1968-31,700 1969-48,127
Pension plans 1968-34,100 1969-44,678
Bond purchase plans 1968 452 1969 562
Employee Benefit Plans:
Profit-sharing plans 1969-9,944
Pension & Annuity plans 1969-11,112
Stock bonus plans 1969- 28
JOINT RETURNS
Once again the question of the liability of the wife for deficiences in income taxes brought about solely by the husband's acts was before the court. Over a period of years, the taxpayer's husband, an office manager for an oil well servicing business, embezzled a quarter of a million dollars. During those years, the wife had voluntarily signed the joint income tax returns and believed that they accurately reported all income earned.
After the embezzlement was discovered, the office manager committed suicide. The court approved the IRS's assessment on the widow for taxes due on the money embezzled and not reported as income. The court said that it realized how harsh the result was on the widow but that such a result can only be changed by Congress, for such are the consequences of signing and filing joint returns. (Alcorn v. Commissioner, T.C. Memo 1969-147.)
G.I. HAIRCUTS
Even though the Army requires that a G.I. get a haircut every two weeks, this is not a deductible business expense was what the Tax Court recently decided. The Army requirement, said the Court, is directed toward the maintenance by soldiers of a high standard of personal appearance not toward the accomplishment of the duties of employment.
masonry January, 1970