Neonatology Associates, P.a. v. Commissioner of Internal Revenue

Summary

In three consolidated test cases involving VEBA welfare benefit plans marketed by insurance promoters, the Tax Court held that corporate employer contributions in excess of the cost of current-year term life insurance are nondeductible disguised (constructive) distributions to the employee/owners, taxable as dividends when made. It further held that contributions to purchase life insurance for nonemployees are not ordinary and necessary business expenses, that section 264(a)(1) bars Marlton's deductions for its employees' life insurance because the sole proprietor was an indirect beneficiary, that all petitioners are liable for accuracy-related penalties for negligence, and that Lakewood is liable for the section 6651(a) failure-to-file addition to tax. The Court denied respondent's motion to impose $25,000 penalties under section 6673(a)(1)(B) against each petitioner. No separate opinions were filed.