Berger Chevrolet, Inc. - Page 9

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            earnings go to, or for the benefit of, the natural objects of the                           
            owners' bounty.                                                                             
                  Because the earnings of the dealerships are diverted to the                           
            dealer-related agencies, it may be questioned why the                                       
            Commissioner did not impute the agencies' earnings to the                                   
            dealerships.  In Lucas v. Earl, 281 U.S. 111 (1930), the Supreme                            
            Court held that income must be taxed to the person who earns it;                            
            see Commissioner v. Culbertson, 337 U.S. 733, 739-740 (1949)                                
            ("the first principle of income taxation:  that income must be                              
            taxed to him who earns it").  However, the Commissioner did not                             
            take that approach here.3  Instead, the Commissioner denied the                             
            dealerships' deductions for commissions paid to their managers on                           
            the theory that the commissions are an expense of the dealer-                               
            related agencies.                                                                           
                  The record is clear that the dealerships, not the insurance                           
            agencies, in fact offer credit insurance, notwithstanding that                              
            under Michigan law the dealerships are not permitted to receive                             
            commissions for selling credit insurance and that in accord with                            
            Michigan law the commissions are channeled to their related                                 
            insurance agencies.  However, the issue presented to us by the                              
            pleadings is not whether the commissions4 paid by the insurance                             

                  3 Conceivably, the Commissioner may have been deterred by                             
            Commissioner v. First Security Bank, 405 U.S. 394 (1972).                                   
                  4 Unfortunately, the word "commissions" is used in two                                
            different contexts with potential for confusion:  (1) Commissions                           
            paid by the insurance companies for the sale of policies, which                             

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