Bernard McMenamy, Contractor, Inc. v. Commissioner
United States Tax Court
M Corp. established a profit-sharing plan under which employer contributions were allocated among the participants on the basis of their compensation weighted for years of past service. As a result of the weighting for past services, employer contributions allocated to the account of the sole stockholder and principal executive officer of M Corp., were proportionately greater in relation to compensation than the allocations to all the other plan participants.
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M Corp. established a profit-sharing plan under which employer contributions were allocated among the participants on the basis of their compensation weighted for years of past service. As a result of the weighting for past services, employer contributions allocated to the account of the sole stockholder and principal executive officer of M Corp., were proportionately greater in relation to compensation than the allocations to all the other plan participants. Held, the weighting for past services results in discrimination in contributions under sec. 401(a)(4), I.R.C. 1954, and the plan…
1Opinion of the Court
OPINTOlSr
In onr tax system, substantial advantages are provided for so-called qualified pension, profit-sharing, stock-bonus, and annuity plans. An employer, which establishes such a plan, may deduct its contributions to it. Sec. 404. The employees, for whom such contributions are made, are not taxable on them at the time they are made, irrespective of whether the employees have vested or forfeitable rights to the contributions. Secs. 402, 403. Since the income earned by the fund is not taxable (sec. 501), both the employer contributions and the income can accumulate tax free. An employee is…
2Cases cited4 opinions
- United States v. CorrellSupreme Court of the United States · 1967
- United States v. SullivanSupreme Court of the United States · 1927
- Ryan School Retirement Trust v. CommissionerUnited States Tax Court · 1955
- Ets-Hokin & Galvan, Inc. v. CommissionerUnited States Tax Court · 1962
3Cited by33 opinions
- Bernard McMenamy Contractor, Inc. v. Commissioner of Internal RevenueCourt of Appeals for the Eighth Circuit · 1971
- Lansons, Inc. v. CommissionerUnited States Tax Court · 1978
- Liberty Machine Works, Inc. v. CommissionerUnited States Tax Court · 1974
- Quality Brands, Inc. v. CommissionerUnited States Tax Court · 1976
- Tamko Asphalt Products, Inc. v. CommissionerUnited States Tax Court · 1979
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