Masonry Magazine August 1973 Page. 32
TAXES
By MIRIAM MCD. MILLER
UNION MEMBERS EXCLUDED
The Commissioner denied a taxpayer-company's right to deduct the amount of the contributions it had made to its profit-sharing plan. The Commissioner's position was that the plan could not qualify because it discriminated in favor of highly paid employees. After paying the assessed deficiency, the company filed suit for a refund.
Of the 21 people employed by the taxpayer only 5 were eligible to participate in the profit-sharing plan. The company sought to justify the apparently discriminatory classification by asserting that all of its nonsalaried employees were unionized and that the union, as a matter of negotiation strategy, withdrew any demand for inclusion in profit-sharing or pension plan in favor of immediate wage benefits.
Before issuing its ruling, the Court noted that while the Commissioner's ruling that a plan was discriminatory is not irrebutable, it does cause a taxpayer to bear a very heavy burden in attempting to overturn it.
The Court found that there was no evidence in the record that the employees, through their union, were ever offered inclusion in the plan by the taxpayer. The union representative who negotiated the latest bargaining agreement with the company testified that they were never informed of the plan's existence or its details, much less tendered inclusion in it.
The Court held that this plan was discriminatory in favor of employees who were shareholder-officers and supervisors. Container Service Co. v. U.S. (6th cir. 1973.)
TAX PROPOSALS
The Nixon Administration has now deleted a proposal in the tax changes it recommended to the Congress. That proposal suggested that employees be taxed on employer contributions to accident and health insurance plans or disability plans.
STRIKING EMPLOYEES
A labor strike was called against a company and four months later the strikers offered to return to work. However, while the workers were out on strike many of their positions had been filled by non-union personnel. Many of the striking employees were not re-employed by the company but were, in effect, involuntarily terminated.
The union and the company entered into an agreement in which it was provided that the company would pay each worker who was not re-employed an amount equal to the wages he would have earned had he not been out on strike. In return, the strikers who were not re-employed received no compensation for the period when they were out on strike.
The IRS advised that the payments made to the strikers who were not re-employed were dismissal payments. A dismissal payment, the IRS explained, is any payment made by an employer on account of involuntary separation
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