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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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Last modified: May 25, 2011