- 162 -
corporation and the person or entity using the services a
contract or similar indicium recognizing the corporation's
controlling position. Johnson v. Commissioner, supra at 891.
The essential factor in all of the tests used is control over the
earning of the income in question.25
Before applying these principles to the facts before us, we
will first discuss some of petitioner's contentions. First, he
has spent a significant portion of his brief trying to establish
that Diesel Power did in fact exist, that it had employees and
offices, and that it actually conducted business. He cites at
least one case in his legal argument that deals with "sham"
corporations. Hospital Corp. of America v. Commissioner, 81 T.C.
520 (1983). Respondent has not contended that Diesel Power was a
"sham" or shell corporation, and we, therefore, do not consider
25 We note that this line of cases was expressly created in a situation
where a service-performer employee is supplying most or all of the services
that produce the income in question. The situation before us at first blush
appears to be somewhat different in that many individuals working at Diesel
Power and CTC provided services to carry out the functions of the various
relationships at issue, whether the relationships constituted consultancies,
promotional or representative arrangements, or distributor agreements.
However, at least until the end of 1974, and, in many cases, significantly
after that date, all of these individuals were acting under petitioner's
direction and control, and we conclude therefrom that the services were
performed on his behalf. This would be no different than, for example, the
situation where a physician who forms a personal service corporation employs
assistants, secretaries, and nurses to help earn the income received in
providing medical care. Therefore, the principles expressed in Johnson v.
Commissioner, 78 T.C. 882 (1982), affd. without published opinion 734 F.2d 20
(9th Cir. 1984), and other cases following it are appropriately applied here.
The issue is who controlled the earning of the income, not whose personal
efforts produced it. See Fritschle v. Commissioner, 79 T.C. 152, 155-156
(1982); American Savings Bank v. Commissioner, 56 T.C. 828, 839-842 (1971).
Page: Previous 152 153 154 155 156 157 158 159 160 161 162 163 164 165 166 167 168 169 170 171 NextLast modified: May 25, 2011