Charles A. Dennis and Alison M. Dennis - Page 14

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          payments will constitute income to the recipient.  Moorman v.               
          Commissioner, 26 T.C. 666, 674 (1956).  These payments are                  
          nothing more than disguised salary.  Beaver v. Commissioner, 55             
          T.C. 85, 90 (1970).  In the situation where the advances are                
          actually loans, when the repayments are offset directly by the              
          future earned commissions, then the recipient will have either              
          commission income or cancellation of indebtedness income at the             
          time of such offsets.  Cox v. Commissioner, T.C. Memo. 1996-241;            
          cf. Warden v. Commissioner, T.C. Memo. 1988-165.                            
               The advance insurance sales commissions here were received             
          during the 1988, 1989, 1990, and 1991 tax years.  At the time               
          petitioner's contract with American was terminated, petitioner              
          had a debit balance in his advance commissions account of                   
          approximately $156,000.  This balance had been paid by the time             
          of trial in this case.  Petitioner testified that he never                  
          defaulted on repayments of the advance commissions, so there was            
          never any need for demand to be made.  Although demand was not              
          made, under the contract and note, had petitioner defaulted,                
          American had the right to demand payment under the contract and             
          loan agreement.  Thus, petitioner was personally liable on the              
          loans.  This is the distinguishing feature between this case and            
          other advance commission cases, where no personal liability                 
          existed in the event of a termination.  Beaver v. Commissioner,             
          55 T.C. 85 (1970); Moorman v. Commissioner, supra; George Blood             
          Enterprises, Inc. v. Commissioner, T.C. Memo. 1976-102.  In                 

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