Edward W. and Edith M. Arnold, et al. - Page 11

                                       - 11 -                                         
               2.   Whether Petitioners Improperly Assigned Income From               
                    Accounting and Real Estate Services to Their                      
                    Corporations                                                      
               Petitioners contend that they did not improperly assign Mr.            
          Arnold’s accounting income to Pacific and Mrs. Arnold’s real                
          estate commissions to EAPC.  Petitioners contend that their                 
          corporations earned that income.  Petitioners contend that the              
          income at issue is not taxable to them under the assignment of              
          income doctrine because the income was earned by their validly              
          organized and operated corporations.  We disagree.                          
               The existence of a validly organized and operated                      
          corporation does not preclude taxation of income to the service             
          provider instead of the corporation.  Wilson v. United States,              
          530 F.2d 772, 777-778 (8th Cir. 1976), Haag v. Commissioner, 88             
          T.C. 604, 610-611 (1987), affd. without published opinion 855               
          F.2d 855 (8th Cir. 1988); see also Commissioner v. Culbertson,              
          337 U.S. 733, 739-740 (1949).  Deciding whether the corporation             
          or the service provider earned the income requires that we decide           
          whether the corporation or its service-performing agent or                  
          shareholder controls the earning of the income.  Johnson v.                 
          Commissioner, 78 T.C. 882, 891 (1982) (and cases cited therein),            
          affd. without published opinion 734 F.2d 20 (9th Cir. 1984).                
               A corporation earns the income if:  (a) The service provider           
          is an employee of a corporation which has the right to direct or            
          control that employee in some meaningful sense; and (b) there               






Page:  Previous  1  2  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18  Next

Last modified: May 25, 2011