- 23 -
We agree with respondent's primary argument.18 It is
hornbook law that the person who earns income is taxed on it.
United States v. Basye, 410 U.S. 441 (1973); Commissioner v.
Culbertson, 337 U.S. 733, 739-740 (1949); Lucas v. Earl, 281 U.S.
111 (1930). Thus, we must decide who "earned" the commissions
paid by ABL during the years in question. We bear in mind that
"the true earner cannot always be identified simply by pointing
'to the one actually turning the spade or dribbling the ball'".
Fritschle v. Commissioner, 79 T.C. 152, 155 (1982) (quoting
Johnson v. Commissioner, 78 T.C. 882, 890 (1982), affd. without
published opinion 734 F.2d 20 (9th Cir. 1984)). We also
recognize the inherent tension between the application of the
assignment of income doctrine in the setting of a closely held
personal service corporation (PSC) and the recognition of a PSC
as a legal entity that is separate from its owners. Moline
Properties, Inc. v. Commissioner, 319 U.S. 436, 438-439 (1943).
We focus primarily on whether CAI or petitioner controlled
the earning of the disputed commissions. See Bagley v.
Commissioner, 85 T.C. 663, 675 (1985), affd. 806 F.2d 169 (8th
Cir. 1986); Johnson v. Commissioner, supra at 890-891. In cases
where the claimed earner is a closely held PSC, such as CAI, this
18 Accordingly, we do not mention or pass on respondent's
alternative arguments.
Page: Previous 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 NextLast modified: May 25, 2011