Terry R. Hardtke and Nancy Hardtke - Page 5

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                                       OPINION                                        
               Petitioners bear the burden of proving that respondent's               
          determinations in the notice of deficiency are erroneous.  Rule             
          142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933).                       
          Unreported Income                                                           
               Respondent determined that Mr. Hardtke had $44,000 of                  
          unreported compensation income from Agency during 1987.  Although           
          Agency made no payments to Mr. Hardtke during that year, respon-            
          dent argues that the amounts that Agency paid to Dinan during               
          1987 with respect to services provided by Mr. Hardtke were income           
          earned by Mr. Hardtke that is includible in petitioners' income             
          for that year.  Petitioners argue that during 1987 Mr. Hardtke              
          provided services to Agency as an employee of Dinan pursuant to a           
          consulting agreement between Agency and Dinan and that he did not           
          provide services to Agency in any other capacity.                           
               It is well established that income must be taxed to the                
          actual earner of that income.  Lucas v. Earl, 281 U.S. 111                  
          (1930).  "In the corporate context, however, the actual earner              
          test may be inadequate because a corporation can earn income only           
          through the personal services of its employees and agents."  Haag           
          v. Commissioner, 88 T.C. 604, 611 (1987), affd. without published           
          opinion 855 F.2d 855 (8th Cir. 1988).  "In numerous instances, a            
          corporation is hired solely in order to obtain the services of a            
          specific corporate employee."  Johnson v. Commissioner, 78 T.C.             
          882, 891 (1982), affd. without published opinion 734 F.2d 20 (9th           



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