0

1













       
B1                          Plans for Select EmployeesB0


       Plans maintained by an employer primarily to provide benefits for
       a select  group of  management or  highly  compensated  employees
       through insurance policies paid for solely by the employer exempt
       from  ERISA's (Employee  Retirement Income  Security Act of 1974)
       reporting and  disclosure requirements.   They  are only required
       to make  plan documents available to  the  Secretary of Labor  if
       requested.   A summary plan  description is not required.   These
       plans  should nonetheless be  in  writing and communicated to the
       covered employees.  New York Life provides a specimen  resolution
       and  specimen  written notification  which follow.  These are the
       only  forms   required  for   those  plans  exempt  from  ERISA's
       requirements.  The select plan  exemption does not apply if there
       are any employee contributions toward the cost of insurance.
       

B1            Guidelines for  Small Employers Establishing an
                   Insured Qualified Sick Pay Plan

                         ERISA REQUIREMENTSB0

       Salary continuation  plans are  employee  welfare benefit  plans,
       and, as such, are covered by ERISA.  While plans for 100 or  more
       employees must  meet the  full requirements  of ERISA, simplified
       requirements apply to smaller plans.

            Small Insured  Plans:   A plan  will be  exempt from most of
       ERISA's reporting  requirements if  (1) it  has  fewer  than  100
       participants, and  (2) benefits  are provided exclusively through
       insurance policies  issued by  an insurance  company the premiums
       for which  are paid  either by  the employer  or  partly  by  the
       employer and  partly by the participant.  These plans are subject
       to two  basic requirements.   The  plan must  be in writing and a
       summary plan description must be furnished to each participant.
            Section 402 of ERISA states that every employee benefit plan
       must  be   established  and  maintained  pursuant  to  a  written
       document.   This written  document must  provide for  one or more
       named fiduciaries  who are  the persons  with  the  authority  to
       control and  manage the  plan.  New York Life provides a specimen
       plan instrument  to be used as a guide by the employer's counsel.
       The requirement  of a  written plan  applies  to  all  employers,
       whether sole  proprietors,  partnerships  or  corporations.    In
       addition to  the ERISA  requirement of  a  written  plan,  it  is
       advisable  that   any  corporation's   salary   continuation   be
       established by resolution by the corporation's Board of Directors
       in  order   to  insure   that  premiums  are  deductible  by  the
       corporation and are not taxable income to the employee.  New York
       Life provides  a specimen resolution to be used as a guide by the
       corporation's counsel.
            A  summary  plan  description  must  be  furnished  to  each
       participant.   It should  be written in a manner the average plan
       participant can  understand and  must explain to participants and
       their beneficiaries  their rights  and obligations under the plan
       provided.    New  York  Life  furnishes  a  sample  summary  plan
       description to  be used  in  conjunction  with  New  York  Life's
       policies.   We believe  that these  two  documents used  together
       should  satisfy   the  ERISA  requirements  for  a  summary  plan
       description.   However,   the employer  should consult  with  his
       attorney on  this point.   The  summary plan  description must be
       updated every  five years if the plan is amended.  If the plan is
       not amended,  the summary  plan description must be updated every
       ten years.   A  copy should  be furnished to all new participants
       within 90 days of their employment.
            Plans for Select Employees:  Plans maintained by an employer
       primarily to provide benefits for a select group of management or
       highly compensated  employees through insurance policies paid for
       solely by  the employer are  exempt  from ERISA's  reporting  and
       disclosure requirements.   They  are only  required to  make plan
       documents available  to the  Secretary of  Labor if requested.  A
       summary plan  description is  not required.   These  plans should
       nonetheless be  in writing.   The  select plan exemption does not
       apply if  there are any employee contributions toward the cost of
       insurance.








B1          Pregnancy Coverage Requirements in Qualified Sick Pay PlansB0


            An employer who funds a salary continuation plan covering 15
       or more  employees is required by Federal law to provide the same
       coverage for  disability from pregnancy as he does for disability
       from sickness.   The  Federal law  places this  obligation on the
       employer, not on the insurance company.
            In addition  to the  Federal law,  many states have statutes
       that deal  with the  subject of pregnancy coverage for employees.
       Many require  it for  groups of  fewer than  15 employees.    You
       should  check  with  the  local  Department  of  Labor  for  your
       individual state's requirements.






B1           Age Discrimination in Employment Act (ADEA) RequirementsB0


            This Federal  law prohibits  employers from refusing to hire
       employees on  the basis  of age,  and from requiring employees to
       retire unless  they meet  certain stringent  requirements.    For
       employees working after age 65, it places certain requirements on
       any salary continuation plans.
            In general,  regulations implementing this act indicate that
       a salary continuation plan funded by New  York Life's  individual
       income protection  policies that  provide not less than two years
       of benefits  for employees  continuing to  work after age 65 will
       meet the  minimum ADEA requirements for such plans.  They must be
       continued in  force for  all employees in the covered classes who
       continue to work after age 65.
   
2


B1                                 SPECIMEN


               Plan Instrument For Establishing An Insured
                         Qualified Sick Pay PlanB0


       1. ____________________ ("the  Company") has  established  a
       salary continuation  plan for employees and it is the intent
       of the Company to maintain the plan pursuant to this written
       instrument.
       
       2. The effect date of the plan is ______________________.
       
       3. The employees  are  insured  through  insurance  policies
       issued by  New York  Life Insurance  Company.  Any dividends
       credited under this insurance are reserved by the Company to
       the extent  that aggregate dividends do not exceed aggregate
       contributions to  the cost  of the  plan made by the Company
       from its own funds.  To that extent, dividends do not become
       an asset of the plan.
       
       4.   The procedure  and method  for funding  the plan is for
       the Company  to pay  premiums for insurance from the general
       assets of  the Company  in accordance with the provisions of
       the policies (after a payroll deduction from employees where
       required).
       
       5. The  named   fiduciary(ies)  of   the   plan   is   (are)
       ______________________________.  (Use   individual  name  or
       title.)   The named  fiduciary may allocate responsibilities
       for the  operation and  administration  of  the  plan  by  a
       document in writing filed with the plan records.
       
       6. The classes  of persons eligible and the conditions under
       which they  become eligible  to apply  for insurance are set
       forth in  the Summary  Plan Description.   The benefits, the
       circumstances under  which insurance  terminates, and  other
       provisions affecting  the insurance  are set  forth  in  the
       insurance policies.
       
       7. The procedure and requirements for amending the insurance
       policies are set forth in the policies.  Any other amendment
       of the  plan, including a change of the named fiduciary, may
       be effected by a document of the plan, including a change of
       the named  fiduciary, may  be  effected  by  a  document  in
       writing signed by an authorized officer of the Company.
       
       
                                ___________________________________
                                            COMPANY NAME
       
                           By:  ___________________________________
       
                                                                   
B1         SPECIMEN:  SHOULD APPEAR ON FIRM OR BUSINESS LETTERHEAD
       
                  Summary Plan Description Of An Insured
                         Qualified Sick Pay PlanB0
                                                                   
       
       You participate  in a  single employer insured Welfare Plan.
       This supplement and your insurance policy(ies) with New York
       Life  Insurance   Company  constitutes   the  Summary   Plan
       Description  required  by  the  Employee  Retirement  Income
       Security Act  of 1974  (ERISA).   This supplement  should be
       retained with your policy(ies).
                                                                   
       1. NAME OF PLAN:
                                                                   
       ____________________________________________________________
       
       2. EMPLOYER IDENTIFICATION NUMBER:
                                                                   
       ____________________________________________________________
       
       3. PLAN NUMBER:
                                                                   
       ____________________________________________________________
       
       4. DATE END OF PLAN YEAR:
                                                                   
       ____________________________________________________________
       
       5. CONTRIBUTIONS TO THE PLAN ARE PROVIDED BY:
          
          Employer ________________%     Employee ________________%
       
       6. The following class or classes of full-time employees are
       eligible to apply for an income replacement policy:
       
       ____________________________________________________________
       
       ____________________________________________________________
       
       ____________________________________________________________
   
       after they  have completed  __________ months  of continuous
   
       full-time employment with _________________________________.
       Your policy provides details of coverage.
       
       7. Should your  employment cease,  this firm  will no longer
       make any  contributions to the plan.  However, you will have
       the right to continue the policy(ies) in force by paying the
       required premium  subject to the provisions in the insurance
       policies.
       
       8. This firm  is   the plan  sponsor, plan administrator and
       Agent for service of legal process.
       
       9. For  additional   details, review  "Statements  of  ERISA
       Rights" and "Claim and Review Procedure."
                   
       
       





B1                                  SPECIMEN



               Resolution For An Insured Qualified Sick Pay PlanB0



       Whereas,  it   is  the   consensus  of   this  meeting  that  the
       establishment of  an employee  accident and  sickness plan  which
       provides the  employee with  salary continuation benefits during
       periods of absence from work due to personal injuries or sickness
       will advance  the best  interest of the (Full  legal name of firm
       or business)   through  the improvement of its relationships with
       its employees, and
       
       Whereas, it  is desirable to make such a Salary Continuation plan
       available to  all employees,  (or specified classes of employees,
       or specified  individual employees)   for  reason of the valuable
       services performed by said employees.
       
       Now Therefore, be it
       
       Resolved that  I am authorized and directed to take such steps as
       may be necessary to establish an Insured Salary Continuation plan
       to  qualify  as an  accident and  health plan  within the meaning
       of  Section  105(b), (c) and Section 106 of the Internal  Revenue
       Code of  1954,  for  the benefit of the aforementioned employees;
       and be it further
       
       Resolved  that  in  order  to  put  the  plan  into  effect,  the
       (Treasurer,I) (is,am) authorized to pay insurance premiums due on
       any disability  income policy or policies issued by New York Life
       Insurance Company,  New York City, New York to a covered employee
       to provide the benefits of or is pursuant to the said plan.
       
       
       
       
                                     Signature:_________________________
       
                                                      SECRETARY





B1            THIS SPECIMEN  FORM IS  FOR GUIDANCE ONLY AND SHOULD BE 
                   USED ONLY WITH THE ADVICE OF LEGAL COUNSEL.B0

B1            SPECIMEN:  SHOULD APPEAR ON FIRM OR BUSINESS LETTERHEAD


                   Written Notification Of The Existence Of An
                         Insured Qualified Sick Pay PlanB0


       Dear Valued Employee:
       
       In recognition  of your past services to this organization and in
       anticipation of  your continued  services to  it, (the  Board  of
       Directors, we,  I)  has  (have)  established  an  Insured  Salary
       Continuation Plan as follows:

       1.   In the  event you  are unable,  because of accidental bodily
       injury or sickness, to  perform the  duties of your job, ( we, I,
       the corporation) will pay you $_________ a ____________  (or full
       salary) for the first  ____________ (days, weeks, months) of such
       disability.   (Days, Weeks, Months) of disability due to the same
       injury or sickness will  accumulate until  you have  been able to 
       perform  all the duties of your  regular job  for a period of six 
       consecutive months,  during which period  you have been  returned 
       to the regular payroll.
       
       2.   In the  event that your disability, as described in 1 above,
       continues beyond ___________ (days, weeks, months) set forth in 1
       above,  your sick pay will cease; but if you qualify for benefits  
       as set  forth  in  policy  # ____________ issued by NEW YORK LIFE 
       INSURANCE COMPANY,  NEW YORK, NEW  YORK and  attached hereto, the 
       premium for  which has  been paid by  (Full legal name of firm or  
       business) you will receive the benefits set forth in that policy, 
       as determined by the NEW  YORK  LIFE INSURANCE COMPANY under that
       contract.
       
       We sincerely hope that you will never have to draw benefits under
       this plan,  not only  for your  own sake  but  also  because  any
       prolonged loss  of your services would be an economic loss to the
       company.  We also hope that the knowledge that these benefits are
       available will  give you  a greater  sense of security which will
       benefit both you and the pursuit of your work.
         
                                Yours truly,
       
       
                                Signature(s) of (Clerk-Secretary, 
                                Sole Proprietor or Partners)
       
       
       I signify that I, ____________________________ received a copy of
                               EMPLOYEE'S NAME
       this letter and New York Life policy(ies)  #_____________________
       was  (were) attached.



B1            THIS SPECIMEN FORM IS FOR GUIDANCE ONLY AND SHOULD
               BE USED ONLY WITH THE ADVICE OF LEGAL COUNSELB0

3



B1               Federal Taxation And Qualified Sick Pay Plans
    
                      Wage Continuation Arrangements


                                    Results When A Plan Exists
    Premiums   Benefits             
    Paid By:   Paid To:   To Employer:               To Employee:B0

       
    Employer   Employer   Premium not deductible,    Premiums not income.     
                          but benefits are tax       Benefits are subject to  
                          exempt. Salary payments    taxation,  but employee  
                          made  during disability    may qualify for a        
                          are deductible.            limited tax credit if    
                                                     under age 65 and retired 
                                                     with total and permanent 
                                                     disability.              

      
    Employer   Employee   Premiums deductible. 
                          Benefits paid directly 
                          to employee in lieu of 
                          salary.  Benefits not     
                          deductible or taxable 
                          to employer.
      
      
    Employee,  Employee   Employer not involved      Increase in salary is   
    Partner,              unless salary of           taxable income. Premiums
    or Propri-            employee is increased      are not deductible.     
    etor                  to cover expense of        Benefits are completely 
                          premium payments. Such     tax-free.
                          an increase would be 
                          deductible as regular 
                          salary.
      

    Split      Employee   Share of premium, whe-     Employee's share of pre-
    Premium:              ther it is paid directly   mium is not deductible  
    Employer/             or as reimbursement, is    and any resulting ben-  
    Employee              deductible.  Any addi-     efits are tax-free.  
                          tional compensation to     Employer's share of pre-  
                          cover balance of premium   mium, whether paid 
                          also a deductible          directly or reimbursed,    
                          expense.                   is not taxable income
                                                     but any resulting
                                                     benefits are taxable.
                                                     Benefits may qualify for
                                                     a tax credit. 

4



B1                          Federal Taxation and 
                        Qualified Sick Pay Plans
    
    TAX AREA:              TAX AREA:                   TAX AREA:
    Premium As Expense     Premium As Income           Benefits As IncomeB0

B1                                INDIVIDUALB0

    Premiums for income    Not applicable.             Benefits payable to      
    replacement plans      Premiums are paid           proprietors, partners,   
    are not deductible.    from after-tax income.      or other individuals,    
    (IRC Section 213)      (IRC Section 213)           from policies on which   
                                                       they have paid the       
                                                       premiums, are tax exempt.
                                                       (IRC Section 104)        

B1                       PARTNERSHIP & PROPRIETORSHIPB0

    Deductible on all      Premiums are not            For employees other 
    employees (but not     considered income to        than the partners   
    partners or propri-    employees (even if          and proprietor refer
    etors) as long as      paid by reimbursement)      to "corporation" (IRC
    (1) paid in consid-    if a Plan exists.           Section 105). For    
    eration of services    Otherwise they could        partners and        
    rendered (2) doesn't   be treated as income.       proprietor refer to 
    constitute             (Always income to           "individuals". (IRC     
    unreasonable           partners and proprietor).   Section 104)        
    compensation and (3)   (IRC Section 106)
    partnership or 
    proprietor is not
    directly or indirectly 
    a beneficiary. Other- 
    wise, deduction could
    be disallowed.
    (IRC Section 162)
    
B1                              CORPORATIONB0

    Deductible to the      Premiums are not            Benefits payable to  
    firm for all           considered income to        employees are taxable
    employees,including    employees (even if          but they may qualify 
    stockholder-employees, paid by reimbursement)      for a limited tax    
    if the premiums are    if a Plan exists.           credit on disability 
    (1) paid in            Otherwise they could        benefits received.   
    consideration of       be treated as               (IRC Section 22)     
    services rendered,     compensation, or a      
    (2) are not            dividend distribution   
    unreasonable com-      to stockholder-employees
    pensation and (3)      (IRC Section 106)
    the company is not         
    directly or indirectly 
    a beneficiary.  
    Otherwise, deduction 
    could be disallowed.
    (IRC Section 162)

5


B1                       Some Questions and AnswersB0


    Q. When should a plan be established?
    A. FIRST...Under Section  105 and  106 of the Internal Revenue Code,
       the plan must be in effect and  communicated to covered employees
       before the employer pays any costs or benefits.
    
    Q. Why is a plan so important to the business owner?
    A. TAXES...Without  it  a  disabled  corporate  stockholder-employee
       cannot receive  sick-pay salary without taking the chance that it
       may be considered unreasonable compensation, and thus be taxed as
       a dividend (Reg.  1.162-7 and 8).
       DEDUCTIONS...Without it the employer may not be allowed to deduct
       the payments  under a  sick-pay  plan  as  a  necessary  business
       expense (I.R.C. 162).
       PENALTIES...Without it  the  I.R.S.  could  recover  back  taxes,
       interest and penalties.
    
    Q. Why is a plan so important to the employee?
    A. TAX FREE...Employer  contributions to  fund a plan (premiums) are
       not  considered  income  to the employee and are  not subject  to
       income tax.
       BENEFITS...An employee  will gain  "peace of  mind" knowing  that
       dollars will  be provided  during a disability.  And the employee
       may be able to qualify for the limited tax credit.
    
    Q. Is IRS approval  needed to  establish the plan or determine which
       employees are to be covered?
    A. NO...The firm does not need I.R.S. approval in either matter.
    
    Q. Are  premiums  for  an  income  replacement  policy  for  a  sole 
       proprietor or  partner deductible  as an  ordinary and  necessary
       business expense when paid by the firm?
    A. NO...Sole proprietors and partners are not considered "employees" 
       by the I.R.S. so premiums paid on their behalf are not deductible 
       by the firm as an ordinary and necessary business expense.(I.R.C.
       Sec. 262 and 162).
       However, disability  benefits received  by a  sole proprietor  or
       partner are  excluded from  gross income and there is no limit to
       the amount of this benefit (I.R.C. Sec. 104 [a][3]).
       And...premiums paid to fund a qualified plan for employees of the
       sole proprietor  or partner  are deductible  to  the  firm  as  a
       necessary business expense.
    
    Q. After an employer or  employee becomes sick, may a salary contin-
       uation plan be established for that disabled individual?
    A. NO...The plan must specify who gets what before a disability. The
       plan should be in writing and communicated to covered employees.
    
    Q. If the employer made  it a general practice of paying full salary
       to  employees  contingent  on  length  of  service and employees' 
       value to firm-does this constitute a plan?
    A. NO...If the details were  not communicated to the employees prior
       to  disability  as to  how  much  and  for how  long, there is no
       specific plan.   

6







B1                        Claim and Review ProcedureB0


          Claim forms  and instructions  for filing  claims may  be
       obtained from  the Plan  Administrator.  Completed forms and
       any other  required material  should be returned to the Plan
       Administrator for  submission to  New York  Life, or  may be
       sent directly to New York Life.
          In addition  to the  basic claim  procedure explained  in
       your policy,  New York  Life will also observe the following
       procedures:
          If a  claim is  wholly or  partially denied, the claimant
       will be  notified within  a reasonable  length of time after
       New York Life received the claim.
          If  New  York  Life  denies  your  claim,  you  shall  be
       furnished a  written statement  of the  specific  reason  or
       reasons for denial, a description of any additional material
       or information  necessary for you to establish your right to
       benefits,  an   explanation   of   why  such   material   or
       information is  necessary, and  specific  reference  to  the
       provision on  which the  decision is  based.  This statement
       shall also  contain an  explanation of  the review procedure
       which you  can  follow  to  have  your  claim  for  benefits
       reviewed.
          A claimant  must file  any request for review of a denied
       claim within  60 days  after receipt of written notification
       of denial of a claim.
          New York  Life will  notify the  claimant of its decision
       within 60  days of  receipt of  the request  for review.  If
       special  circumstances  require an  extension  of  time  for
       processing, New  York Life will render a decision as soon as
       possible, but  no later  than 120  days after  receiving the
       request.   New York  Life will notify the claimant about the
       extension.
            All notification from New York Life will be in writing.



B1         THE ABOVE PROCEDURES ARE REQUIRED UNDER THE PROVISIONS OF
          ERISA. IN CASES WHERE STATE LAWS ARE MORE STRINGENT THAN
                THE ABOVE, NEW YORK LIFE WILL COMPLY WITH
                           STATE REQUIREMENTS.
B0
7


B1                        Statements of ERISA Rights
B0

          As a  participant, you are entitled to certain rights and
       protections under  the Employee  Retirement Income  Security
       Act  of   1974  (ERISA).    ERISA  provides  that  all  plan
       participants shall be entitled to:
          Examine, without  charge,  at  the  Plan  Administrator's
       office and  at other specified locations, such as work-sites
       and union  halls, all  plan documents,  including  insurance
       contracts, collective  bargaining agreements  and copies  of
       all documents  filed by the plan with the U.S. Department of
       Labor,  such   as   detailed   annual   reports   and   plan
       descriptions.
          Obtain copies  of  all  plan  documents  and  other  plan
       information upon  written request to the Plan Administrator.
       The Administrator  may make  a  reasonable  charge  for  the
       copies.
          In addition  to creating  rights for  plan  participants,
       ERISA imposes duties upon the people who are responsible for
       the operation  of the  employee benefit plan. The people who
       operate your  plan, called "fiduciaries" of the plan, have a
       duty to do so prudently and in the interest of you and other
       plan participants and beneficiaries.  No one, including your
       employer, your  union, or  any other person, may fire you or
       otherwise discriminate against you in any way to prevent you
       from obtaining  a welfare  benefit or exercising your rights
       under ERISA.   If your claim for a welfare benefit is denied
       in whole  or in part, you must receive a written explanation
       of the  reason for  the denial.   You have the right to have
       the plan reviewed and reconsider your claim.
          Under ERISA,  there are steps you can take to enforce the
       above rights.   For  instance, if you request materials from
       the plan  and do  not receive  them within  30 days, you may
       file suit in a federal court.  In such a case, the court may
       require the  Plan Administrator to provide the materials and
       pay you  up to  $100 a  day until you receive the materials,
       unless the materials were not sent because of reasons beyond
       the control  of the  Administrator.  If you have a claim for
       benefits which  is denied  or ignored,  in whole or in part,
       you may file suit in a state or federal court.
          If it  should happen  that plan  fiduciaries  misuse  the
       plan's money,  or  if  you  are  discriminated  against  for
       asserting your rights, you may seek assistance from the U.S.
       Department of  Labor, or  you may  file suit  in  a  federal
       court.  The court will decide who should pay court costs and
       fees.   If you  lose, the  court may  order you to pay these
       costs and  fees, for  example, if  it finds  your  claim  is
       frivolous.
          If you  have any  questions about this statement or about
       your rights under ERISA, you should contact the nearest Area
       Office of the U.S. Labor-Management Services Administration,
       Department of Labor.

8


       B1        Estate of E. W. Chism and Chism Ice Cream Company
       B0   T. C. Memo 1962-b; Affirmed, 322 F.2d 956 (9th Cir) (1963)

                Tax Year:  1952-1956;  Year of Decision:  1962


       Background:   E. W.  Chism, his  wife, Clara, and their daughter,
       Alice, owned  all of  the stock  of Chism  Ice Cream  Company,  a
       Nevada Corporation.  E. W. Chism was president and drew an annual
       salary of $24,000.  Mrs. Clara Chism was corporate secretary with
       no salary.   Alice Chism was vice president and received a salary
       of $5,000 per year.
       
       In 1948,  Mr. Chism  developed a  heart ailment which became more
       serious in  1951.  From 1952 to his death, he was confined almost
       entirely to his home.  He continued to act as president, although
       his activity  was restricted  to conferences  at  home  with  his
       general manager.  His salary of $24,000 was continued.
       
       The Plan:  There was only an informal custom of making payment to
       various employees  who were out of work due to illness or injury.
       The employees  were unaware  of any plan and had no rights to any
       payments except  those  the  corporation  wished  to  make  in  a
       particular case.
       
       Tax Questions:   There  was no  evidence that  a plan  for salary
       continuation  existed   before  Mr.   Chism's  disability.    The
       contention that  the corporation  paid other  employees who  were
       disabled doesn't  establish a  plan.   There was no evidence that
       Mr. Chism knew of the details of a "plan" before he was disabled.
       Any plan,  if there  was one,  was not  legally enforceable.  The
       payments aren't  deductible as compensation because there were no
       services performed.   Since  there was  no plan, the payments did
       not qualify for the sick-pay exclusion.
       
       Tax Court  Decision:   The Tax  Court agreed with IRS.  Since the
       payments to Mr. Chism were not deductible business expenses, but,
       rather,  dividends,   the  corporation   had  to  pay  additional
       corporate tax  for the  five years  they  paid  Mr.  Chism,  plus
       interest and  penalties.  Since the payments to Mr. Chism did not
       qualify for  the sick-pay  exclusion, the $5,200 per year income-
       tax exemption  was disallowed.   Additional income taxes for five
       years, plus interest and penalties had  to be paid.
       
       Significance:   Substantial additional corporate and personal tax
       had to  be paid  because:  (1) a salary continuation plan was not
       set up in advance;(2) the details of who received what, beginning
       when, and  for how  long were  not communicated to the employees;
       (3) the  details of  the plan  were not put in writing (while the
       regulations do  not require  that a  plan be  in writing,  it  is
       obvious that  a plan  which is  in writing is easier to establish
       and prove  than one  which is not).  Also, the fact that payments
       were made  to another  employee in  the past  did not establish a
       plan.

