Free Stipulation - District Court of Arizona - Arizona

1 FENNEMORE CRAIG
Christopher P. Staring (N0. 0111 10)
2 One South Church Avenue, Suite 1000
Tucson, Arizona 85701-1627
3 Telephone: (520) 879-6800
Email: [email protected]
4
Attorneys for Defendants
5
6 UNITED STATES DISTRICT COURT
7 DISTRICT OF ARIZONA
8 Jolgn Roehrs, M.D. and Jean Roehrs, his No. CIV-03-1373-PHX-LOA
wi e,
9 Pimtirrs,
10 v. STIPULATION CONCERNING
I I Minnesota Life Insurance Company, a TAX ISSUES
foreign corporation, and Standard
12 Insurance Company, a foreign corporation,
Defendants.
13
14 The parties present this Stipulation Concerning Tax Issues in order to comply with
15 the Cou1t’s December 8, 2005 Order, and in connection with the trial of the ERISA issues.
16 This Stipulation represents a good faith, cooperative effort to answer the Court’s
17 questions, and avoid the expense and inconvenience of reconvening the ERISA trial.]
13 1. At all times pertinent to this case, and as stated in both the original
19 application for insurance (Ex. 2, p. AND048) and the amended application p. 4 (Ex. 5B),
20 Pulmonary Medicine Specialists ("PMS") was a Professional Corporation, and was
21 considered a C corporation for tax purposes.
22 2. It is not known whether PMS took tax deductions for the amounts it paid for
23 disability premiums. In other words, the parties cannot determine whether PMS took
24 deductions in the amounts of the disability premiums paid for Dr. Roehrs, If PMS did,
25 ' In the interest of brevity, and in the belief that the Court has all trial testimony, the parties have
not included any testimony with this Stipulation. If the Court wishes, a transcript of the trial
26 testimony can be provided.
P l"l1NvNl€MORvl€ URAIG
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Roehrs v. Standard Insurance Company, et al.
CIV-03-1373-PHX-LOA
l there is no way to determine whether PMS deducted those amounts as ordinary business
2 expenses or as salary paid to Dr. Roehrs. If Dr. Roehrs reimbursed PMS for the premium
3 payments, either by direct payment by Dr. Roehrs or by PMS reducing the cash amount of
4 Dr. Roehrs’ bonuses by the amounts of the premiums, it would not have been proper for
5 PMS to deduct the premiums as ordinary business expenses as opposed to salary. If PMS
6 did deduct them, and if they were deducted as salary expenses, they should have been
7 included in the "Wages, tips and other compensation" in the various Box 1s of Dr.
8 Roehrs’ W-2s (Ex. 57) according to applicable rules and regulations of the IRS.
9 3. Due to a lack of documentation (which neither Plaintiffs nor Defendants
10 were able to locate), there is no way to determine precisely what made up the "Wages, tips
l1 and other compensation" in the various Box ls of Dr. Roehrs’ W-2s (Ex. 57). In other
12 words, based on the record, there is no way to determine whether the premium payments
13 were added to Dr. Roehrs’ W-2s as income and, therefore, were capable of being deducted
14 by PMS as salary expenses, or not added as salary, and, therefore, were perhaps
15 improperly deducted by PMS as ordinary business expenses, or not deducted at all by
16 PMS.
17 4. Dr. Roehrs’ W-2s (Ex. 57) do not provide conclusive evidence concerning
18 the question of whether or not the premium payments were added to his Box 1 "Wages,
19 tips and other compensation." Defendants respectfully withdraw any contention to the
20 contrary.
21 5. If disability premiums were specifically added to Dr. Roehrs’ W-2s as
22 income, with the effect that they were identifiable as part of the calculation of his taxable
23 income, subsequent disability benefit payments would not be taxable. This is what is
24 known as paying for disability insurance on an "after-tax" basis.
25 6. If disability premiums were not specifically added to Dr. Roehrs’ W-2s as
26 income, with the effect that they were not identifiable as part of the calculation of his
5218867 Stipulation Concerning Tax Issues
Case 2:03-cv-01373-LOA Document 142- 2 - Filed O1/11/2006 Page 2 of 3

Roehrs v. Standard Insurance Company, et al.
CIV-03-1373-PHX-LOA
1 taxable income, subsequent disability benefit payments would be taxable. This is what is
2 known as paying for disability insurance on a "pre—tax" basis.
3 DATED this l lm day ofJanuary, 2006.
4 FENNEMORE CRAIG
5
6 By /s/ Christopher P. Staring
Christopher P. Staring
7 Attorneys for Defendants
8 LOUIS C. WEBB, PC
9 and
10 MESCH, CLARK & ROTHSCHILD PC
1 1
By /s/ Douglas H. Clark, Jr.
12 Douglas H. Clark, Jr.
Louis C. Webb
13 Attorneys for Plaintiffs
ORIGIIEIAL electronically filed
14 this 1 lt day of January, 2006, with
copy to:
15
The Honorable Lawrence O. Anderson
16 United States District Court — Phoenix Division
401 W. Washington Street
17 Phoenix, Arizona 85003
18 copv MAILED this 41% day or
19 January, 2006, to:
Lou Webb, Esq.
20 Louis c. WEBB, irc.
76 East Mitchell Drive
21 Phoenix. AZ 85012-2330
22 Douglas H. Clark, Esq.
MESCH, CLARK & ROTHSCHILD PC
23 259 North Meyer
24 Tucson, AZ 85701-1090
25 Attorneys for Plaintiffs
26 /s/ Betsy H. Bowse
l:l·.NNEMOR`IE CRAIG · . I
’``’ Stipulation Concerning Tax Issues
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