Edward and Ruth Kelly - Page 15

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            the options rather than as ordinary income, or the paid                                       
            commissions should be treated as deductible business expenses                                 
            that more than offset his commission income.  Petitioners argue                               
            that this integrated approach to taxing the commission                                        
            transactions would more accurately reflect their substance and                                
            has parallels in other areas of the Code.                                                     
                  We have no occasion to consider whether either of                                       
            petitioners' proposals for integrating the tax treatment of the                               
            commissions at issue to achieve consistency would be desirable as                             
            a matter of tax policy; the proper tax treatment of such                                      
            commissions is well established.  The parties have stipulated                                 
            that Mr. Kelly received the commissions as compensation for                                   
            providing business for his employer.  There is no evidence that                               
            they were intended specifically as a discount or rebate.  The                                 
            definition of gross income expressly covers "compensation for                                 
            services, including * * * commissions".  Sec. 61(a)(1).  The fact                             
            that the taxpayer earned the commissions on transactions in which                             
            he acquired property from or through his employer for his own                                 
            account does not alter their character as ordinary income.  The                               
            argument that in such cases the commissions should be treated as                              
            discounts from the cost of the property, and accounted for by                                 
            adjustments to basis or the sale price rather than included in                                
            gross income, has been repeatedly rejected by this Court and                                  
            others.  Ostheimer v. United States, 264 F.2d 789 (3d Cir. 1959)                              

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