Peterson v. Comr., T.C. Memo. 2013-271

(petitioner was Mary Kay consultant and formed defined benefit plan that petitioner's sole proprietorship adopted; petitioner then transferred consulting income to limited partnership, but Mary Kay refused to pay consulting income to partnership, but petitioner reported expenses of consulting business on the partnership; defined benefit plan restated and adopted by partnership; petitioner claimed deductions of approximately $750,000 for funding plan; income from partnership reported by petitioner on K-1; IRS claimed that partnership not a business and had no income on which to base plan contributions and partnership had no self-employment income on which to base contributions; court determined that petitioner conducting business and that restated plan document adopted when partnership formed said that employer sponsoring plan was "entity specified in Adoption Agreement, any successor which shall maintain this Plan and any predecessor which has maintained this Plan"; court reasoned that petitioner's sole proprietorship original plan sponsor and was employer for plan purposes and could contribute to plan and claim deduction; on separate issue, court determined that petitioner's income received in 2006-2009 (during retirement years) was derived from past Mary Kay sales work and was performance-based (calculated based on previous commissions, age at retirement and years of service) earned during employment and was subject to self-employment tax).