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Classic Gallery
Petitioner called his business Classic Gallery, and the
corporation elected to file Federal income tax returns for the
business as an S corporation. After the second or third year of
operations, the business began generating enough income to allow
petitioner to draw a salary. Before 1978 petitioner's average
income was below $75,000. After 1978 the company's profits
"blossomed", generating for petitioner a very substantial six-
figure income in wages and dividends.
Over the years, Corman became petitioner's friend,
associate, and chief adviser. Corman came to be retained on a
monthly basis to provide accounting advice and services to
Classic Gallery. As petitioner's furniture manufacturing
business prospered, Corman began to suggest to petitioner how his
earnings from the corporation might be invested. Although Corman
presented various investment "possibilities" to petitioner, he
was not separately compensated as an investment counselor.
Petitioner discussed the investment proposals with Corman,
reviewed materials that Corman presented, and evaluated them "a
number of different ways". Although petitioner relied on Corman
to tell him if something was a "good investment", he did not
"just blindly accept" Corman's recommendations. Petitioner
rejected some investments presented to him by Corman.
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Last modified: May 25, 2011