Charles A. Dennis and Alison M. Dennis - Page 15

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          Beaver v. Commissioner, supra, advance commissions were not loans           
          because personal liability did not attach until after the years             
          in question, while at the time the advances were made there was             
          no personal liability, and the payor treated the advances as                
          salary advances.                                                            
               Additionally, there was an administration fee of 1.3 percent           
          per month charged against the advance commissions balance.                  
          Although it was not referred to as interest, petitioner testified           
          that the parties referred to and treated the fee as interest.  In           
          light of the facts and circumstances in the record, this                    
          testimony is logical and is accepted as fact.  Given these facts,           
          we find that the advance commissions were loans and need not be             
          included in income where the income was earned as commissions on            
          sales or renewals perhaps in a later year.  Respondent did not              
          determine the amount of income earned when petitioner sold                  
          insurance.                                                                  
          Self-Employment Tax                                                         
               Having decided that petitioner's receipt of the advance                
          commissions constituted loan proceeds and not income, it follows            
          that they are not liable for self-employment tax in the years in            
          question on those amounts received.  However, a deduction of $403           
          on Schedule C has been disallowed due to a lack of                          
          substantiation.  Petitioners' nonemployee income is therefore               
          increased by $403, necessitating an increase in the self-                   
          employment tax on that amount.  Sec.  1401.  Respondent concedes            




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